• Germany's news in English
 
app_header_v3

The ins and outs of buying property

The Local · 18 Nov 2011, 12:06

Published: 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

Story continues below…

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
Is German diplomacy getting too chummy with Russia?
Russian President Vladimir Putin meeting German Foreign Minister Frank-Walter Steinmeier. Photo: DPA/AFP Pool.

Critics have been questioning the German Foreign Minister's recent series of comments about working closer with Russia, with some labelling the diplomat a "Russia-sympathizer".

Police investigate after mosque door is bricked shut
The bricked-up door. Photo: Facebook/Netzwerk für Flüchtlinge in Parchim.

Unknown people have bricked up the entrance to a mosque in northeastern Germany and stuck racist flyers to their masonry work.

Vice-Chancellor: TTIP trade deal is dead
Photo: DPA

Vice-Chancellor Sigmar Gabriel said Sunday that negotiations on a massive trade deal between the European Union and the United States were effectively dead in the water.

Law to force mums to give up identity of child's real father
Photo: DPA

Germany has drafted a law requiring mothers to inform their partners if their children were fathered by another man, Justice Minister Heiko Maas said on Monday.

Gallery
Germans race bulls too, but with a difference
Photo: DPA

The most important sporting events only happen every four years: the World Cup, the Olympics, and of course the Münsing ox race.

Attempted murder charge for Isis teen who stabbed cop
A police officer stands on a train platform at Hannover main station. Photo: DPA

German federal prosecutors said Monday they had brought charges against a 16-year-old girl who allegedly stabbed a policeman in February in an operation for Isis.

Nearly 9,000 refugee children reported missing: report
Refugee children in Hamburg. Photo: DPA.

German media reported on Monday that the number of refugee children reported as missing has doubled to reach nearly 9,000.

EU nations must not refuse Muslim migrants: Merkel
Photo: DPA

The refusal of some EU countries to accept Muslim refugees is "unacceptable", Chancellor Angela Merkel said Sunday as Germany called for quotas to divide the influx throughout the bloc.

Naked swimmer hospitalized after angler hooks his penis
File photo: DPA

When a man swimming naked in a Bavarian lake felt a strange pain in his nether regions, he looked up to see a fisherman on the shore. "Don’t pull!" he shouted.

Study finds rival Rhineland beers 'actually taste the same'
Left: Altbier. Right: Kölsch. Or can you even tell? Photos: DPA.

Cologne and Düsseldorf have a long established rivalry, not least over who has the better home brew. So the results of a new study might be more than they can swallow.

Sponsored Article
Why you should attend an international job fair
National
Ouch! Naked swimmer hospitalized after angler hooks his penis
Sponsored Article
Why expats choose international health insurance
National
Six reasons why Berlin is now known as 'the failed city'
National
15 tell-tale signs you’ll never quite master German
Sponsored Article
Why you should attend an international job fair
Culture
7 American habits that make Germans very, very uncomfortable
Sponsored Article
Life in Jordan: 'Undiscovered treasure'
Rhineland
Story of a fugitive cow who outwitted police for weeks before capture
Culture
Eleven famous Germans with surnames that'll make your sides split
Lifestyle
The best ways to get a visa as an American in Germany
Sponsored Article
Why Jordan is the ‘Different’ East
Gallery
Germany's 17 Olympic gold medals in pictures
Sponsored Article
Five things Americans should know about voting abroad
14 facts you never knew about the Brandenburg Gate
Society
Ten times Germans proved they really, really love beer
Sponsored Article
Jordan Pass: your ticket to the experience of a lifetime
Lifestyle
What's on in Germany: events for August 2016
Sponsored Article
Jordan: where history meets adventure
National
Six things you need to know when moving to Germany
Travel
These 10 little-known German towns are a must see
Sponsored Article
6 reasons expats use TransferWise to send money
International
German scientists prove birds can sleep while flying
Sponsored Article
Why you should attend an international job fair
Technology
London v. Berlin: Which is better for startups?
Sponsored Article
Five things Americans should know about voting abroad
Lifestyle
13 mortifying mistakes German learners always make
Sponsored Article
Jordan: where history meets adventure
Travel
Enter if you dare: Berlin's best abandoned haunts
Sponsored Article
6 reasons expats use TransferWise to send money
Lifestyle
10 rookie errors all Brits make when they arrive in Germany
National
How to get German citizenship (or just stay forever)
Technology
Brexit will turn Berlin into 'Europe’s startup capital'
Travel
Six soothing day trips to escape the bustle of Berlin
International
'Germany needs to make UK come to its senses'
Features
Six odd things Germans do in the summer
7,447
jobs available
Toytown Germany
Germany's English-speaking crowd