• Germany edition
 
Personal Finance in Germany
The ins and outs of buying property
Photo: DPA

The ins and outs of buying property

Published: 18 Nov 2011 12:06 GMT+01:00
Updated: 18 Nov 2011 12:06 GMT+01:00

Buying a home is often the biggest purchase people make in their lives, so it pays to do plenty of homework before signing on the dotted line for a mortgage. Unlike countries such as the United States or Britain, Germany has never been a country with a high level of home ownership.

Nevertheless, Germany has one of the most sophisticated banking systems in Europe and consumers should weigh up their options carefully before taking out a home loan. Price comparison websites enable consumers to compare the prices of mortgages offered by a variety of leading providers.

While mortgage providers in Germany do not offer borrowers tailored English-language products, lenders such as Commerzbank, Deutsche Bank and ING DiBa all employ customer service staff with good English language skills.

“Deutsche Bank became very strong over the past two years as a mortgage lender, but also ING-DiBa, Europe's largest online bank," said Marcus Preu, deputy editor at price comparison website Biallo.de.

Compared with the mortgage markets of countries such as the US and UK, lenders in Germany require borrowers to stump up large down-payments, which can be as much as 40 percent of the value of a property.

Monika Arens, a spokeswoman for Commerzbank, said customers should have between 10 percent and 20 percent of the property purchase price. “Depending on the loan constellation and rating of the client, a smaller deposit or no deposit can also be sufficient,” she adds.

Arens said that there were no concrete rules governing the size of a mortgage loan in relation to a borrower’s income. “The granting of a loan will be decided for each client individually. This decision is based on the intrinsic value of the real estate, the total wealth of the client and his or her disposable income,” she said.

But borrowers should scrutinise mortgage offers for ancillary fees and charges.

“Sometimes banks charge ‘estimation costs’, which should be refused. Normally all fees are included in the effective interest rate. At the moment it is possible to borrow €100,000 for a period of ten years at a cost of about €320 to €350 per month,” said Preu of Biallo.de.

Property essentials

Taxes on property purchases, known as Grunderwerbsteuer, vary between 3.5 percent and 5 percent depending upon the German state where it is levied. Navigating the legalities of buying a property in Germany is not easy, especially for those who cannot speak German. This usually makes using an estate agent a sensible choice but fees for agent services are typically 6 percent of the purchase price - plus value added tax.

All property purchases in Germany have to be done under the supervision of a notary. He or she will observe both the buyer and seller signing the contract for the purchase of the property and charge a notary fee of 1.6 percent of the purchase price. A so-called Notarkonto account can also be used to transfer funds from buyer to seller, but this will cost an extra notary fee.

Prospective property buyers who sign up with an estate agent should check that the agent provides a full legal service. Buyers need a local lawyer to do the paperwork, which includes the land registry (Grundbuch), purchase contract (Kaufvertrag) and building declaration of partition (Teilungserklarung). The land registry will disclose if the property is free of encumbrances (such as old mortgages). Buyers whose estate agent fails to provide legal assistance will have to find a lawyer, who may exact a costly fee.

Only once a buyer has been listed in the Grundbuch, usually carried out at the local Bezirksamt, is he or she the legal owner of a property.

But prospective homeowners should be aware that making a mortgage payment is not the only monthly expense. If you own a flat in an apartment building, monthly fees called Hausgeld will cover water, heating costs, rubbish collection and general upkeep. They can easily add up to a few hundred euros a month depending upon the size of the property.

It is also quite common for homeowners in Germany to be liable to pay for maintenance work on the street where a property is located. The contract on the property purchase should disclose whether a homeowner will be liable for such additional charges.

Schufa credit report

When an application for a mortgage is made in Germany, the bank will contact Schufa, a credit and loan data repository. The bank will request a copy of the mortgage applicant’s Bonitätsauskunft file, which holds comprehensive details of a consumer’s credit rating.

If a prospective mortgage applicant does have an unpaid debt recorded on file, the bank could refuse the mortgage application. In such circumstances, a borrower rejected for a loan can apply for a copy of his or her Bonitätsauskunft by visiting www.meineschufa.de. An English language form is available for non-German speakers.

Once completed, the form should be sent to Schufa with a fee of €18.50 and a photocopy of an applicant’s passport which is required as a form of identification for both German and non-German citizens.

However, while a Schufa report does play an important part in determining whether a mortgage application is rejected or not, it does not play as an important a role as in other countries such as the United States.

“In America a credit reference bureau holds much more data on consumers, including information on how much he or she earns. This is not the case in Germany. So a bank considering a mortgage loan application may be more interested in how much a borrower earns, who their employer is and the size of his or her deposit. In Germany, this information is gathered by the bank itself,” said Schufa spokesman Christian Seidenabel.

The Local (news@thelocal.de)

Your comments about this article

20:49 November 18, 2011 by murka
1.6 % notary fee is pretty ridiculous given the amount of actual work. The consequence of the fossilized legislation, protecting the notary market in a mafia style. Non-Germans, even European citizens, were verboten from this profession until just 1/2 year ago, when European Court has overridden the law.
10:28 November 19, 2011 by bartschaff
Well said, murka.

Notaries are nothing but a mafia of parasites, worms that would be exterminated if legislation were modernized.
16:04 November 19, 2011 by kjello
Maybe a little on the side-line of the topic, but does anybody know how long a tenant has the right to live in a flat you buy in Berlin? Some people says 7 years others says there has been a law-change and its now 3 years...
10:13 November 24, 2011 by asteriks
don't buy home/flat, make your own house from basement till roof.
15:12 November 24, 2011 by 115spider
murka,

almost all the politicians here have law degrees (most of them even did them themselves...)

as they will need to return to the law if they get booted out of office dont expect any major changes in the little guys favour
23:28 November 25, 2011 by bobmarchiano
In the U.S. every bank has a notary and the fee is $0

When buying a house in the states you do not did a lawyer.

And if you should decided to hire one to do your paper work and to

be there at the closing the fee is normal around $250-$500.

no matter the cost of the property
01:02 December 3, 2011 by brnskin2010
This is germany ppl......
Today's headlines
The Local List
Eight expat groups to save you in Germany
Photo: Jan Perlich/Munich RFC

Eight expat groups to save you in Germany

Think you're the only English speaker in your town or region? Think again! The Local List this week runs through eight of the best expat groups and clubs in Germany. READ  

Victims of GDR regime get benefit boost
Former GDR political prisoners Hartmut (l) and Gerda Stachowitz in a East Berlin prison which has stood empty for 20 years. Photo: DPA

Victims of GDR regime get benefit boost

Benefit payments to former political prisoners of ex-communist East Germany (GDR) will be raised to send an "important message" 25 years after the fall of the Berlin Wall, the government said on Wednesday. READ  

Cabinet agrees cap on city rent rises
Apartments in Leipzig. Photo: DPA

Cabinet agrees cap on city rent rises

Germany's cabinet agreed on Wednesday to cap ballooning property rents in high-demand urban neighbourhoods in a law set to come into force early next year. READ  

Berlin flights disrupted by WWII bomb find
Passengers are delayed at Tegel Airport. Photo: DPA

Berlin flights disrupted by WWII bomb find

UPDATE: The discovery of a US World War II bomb disrupted flights at Berlin’s Tegel Airport on Wednesday afternoon, with no flights taking off or landing for 30 minutes. The bomb has now been defused but later flights are still delayed. READ  

Refugee abuse guards 'nicknamed the SS'
A photo allegedly showing guards abusing one refugee. Photo: DPA/Police

Refugee abuse guards 'nicknamed the SS'

A group of guards who allegedly abused refugees in an asylum centre in western Germany were nicknamed “the SS” after Hitler's stormtroopers, according to one of their colleagues. Photos of guards abusing refugees have sparked a backlash in Germany against security firms. READ  

Nestle wins the food prize no one wants
First prize went to Nestle for its sugary baby food. Photo: Foodwatch

Nestle wins the food prize no one wants

A food watchdog presented Nestle with a prize to avoid on Wednesday for the cheekiest false advertising of the year. The runner-up was a chicken soup with no chicken in a vote of almost 160,000 Germans. READ  

Merkel's VIP jet set to fly soldiers home
One of the two A340 planes which are reserved for the Chancellor and government leaders. Photo: DPA

Merkel's VIP jet set to fly soldiers home

One of Chancellor Angela Merkel’s VIP jets is set to be used to ferry soldiers home who are stuck in Afghanistan, due to ongoing problems with the German military’s transport planes. READ  

German firms top EU lobbying list
Siemens was the highest ranked German company when it came to spending on EU lobbying, according to the register. Photo: DPA

German firms top EU lobbying list

Germany companies are among the biggest spenders when it comes to EU lobbying to influence decision makers in Brussels. There are more German lobbying organizations registered than from any other country in Europe but Belgium. READ  

City starts beer for alcoholics project
Photo: DPA

City starts beer for alcoholics project

A city in western Germany will start a controversial project on Wednesday to employ alcohol and drug addicts to clean the streets in return for beer, tobacco, food and small amounts of cash. READ  

Fault forces Germany to cut Eurofighters
A German Eurofighter. Photo: DPA

Fault forces Germany to cut Eurofighters

A manufacturing fault has been discovered in the troubled Eurofighter Typhoon warplanes, Germany's defence ministry said on Tuesday, announcing it was suspending deliveries of the sophisticated jets. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Munich
Bavarian independence becomes a reality... (online)
Photo: DPA/Police
National
'Criminals are at work in refugee homes'
Photo: DPA
Business & Money
Immigrants have created how many German jobs?
Photo: DPA
National
Revealed: Germany's military feet of clay
Marks & Spencer
Sponsored Article
Marks and Spencer: Win €300 toward your new autumn wardrobe
Photo: Shutterstock
Society
Quiz: How good is your German?
Photo: DPA
Gallery
Thousands take to Berlin's streets for marathon
Photo: DPA
Society
'Incest should be legal,' says ethics board
Photo: DPA
Gallery
Ten noises that sound very different in German
Photo: DPA
Society
QUIZ: Can you pass the German citizenship test?
Photo: Shutterstock
Gallery
Ten German words you'll never want to hear again
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

3,183
jobs available
Toytown Germany
Germany's English-speaking crowd