Glossary of German Real Estate Financing Terms

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Real Estate Financing Terms: German to English

Tilgung? Ratenpausen? Sonderzahlung? Even those comfortable with the German language may be overwhelmed by the large and sometimes confusing area of real estate financing in Germany. Buying property in Germany as a foreigner doesn't have to be overly complicated, so we've compiled a glossary to help you along the way. We guide you through the jungle of real estate financing definitions and explain the most important types of German financing in a simple and understandable way.

A

Annuitätendarlehen (Annuity loans)

The annuity loan is one of Germany's most popular types of real estate financing. The credit rate is made up of the borrowing rate and the repayment component. The interest rate is fixed for a period of 1 to 30 years depending on your individual needs. As the interest component sinks over the years, the repayment component increases, since the residual debt is minimised with each repayment. However, the interest is always based on this percentage and the monthly interest rates decrease accordingly. At the end of the fixed interest period, the remaining debt is repaid in the form of follow-up financing, if necessary.

Anschlussfinanzierung (Follow-up financing)

Follow-up financing refers to the continued financing of the remaining debt after the end of the fixed interest period.

B

Baukindergeld (Children's allowance)

The Baukindergeld is a federal government support scheme that has been in effect since 2018 and aims to help families with children to acquire residential property. Over a period of 10 years, they can claim a state subsidy of €1,200 per child per year, when buying or building a new home.

Bauspardarlehen (Home savings loan)

With a home savings loan, the customer saves a contractually agreed minimum amount. After a minimum period, he can either terminate the home loan savings contract and have it paid out or accept a loan offer that he can use (solely) for residential purposes.

Come prepared too any financing meeting with an index of German terms.

E

Eigenkapital (Equity)

Equity is the capital portion that is made up of one’s own financial resources. This includes, for example, your own savings or a home savings contract.

Eigenleistung (Personal contribution)

The personal contribution, colloquially also called "muscle mortgage", refers to work to be carried out independently, such as renovation or refurbishment work.

F

Flex-Darlehen (Flex loan)

Flex or combo loans include variable funding options that combine different types of loans.

Fremdkapital (Borrowed capital)

Borrowed capital is money that other financing partners make available for real estate financing when one's own capital is not sufficient. Financing partners can be banks, building societies, insurance companies, but also employers. The provision of debt capital is subject to certain rules. For example, it is limited in time, must be repaid, and bears interest.

G

Grunderwerbssteuer (Real estate transfer tax)

The real estate transfer tax is one of the ancillary purchase costs and is always levied in Germany when real estate or land changes hands. The few exceptions to this rule include inheritance, a gift, or sale between persons with a straight line of kinship, such as parents and children.

These real estate definitions will help you navigate German financing options.

H

Hypothek (Mortgage)

A mortgage is a so-called real estate lien to secure property financing, which serves as security for lenders for the provided property loan.

I

Instandhaltungsrücklage (Maintenance reserve)

The maintenance reserve of a property is saved by the owner to cover future maintenance costs. When buying or building a new property, you should already plan for this in advance.

K

Kaufnebenkosten (Ancillary purchase costs)

Ancillary purchase costs are the costs which are incurred in addition to the purchase price of the property and can account for about 10-15% of the final cost. These include notary's fees, real estate transfer tax, or the broker's commission, which is not applicable with EverEstate as we offer all our properties commission-free.

Kreditwürdigkeit (Creditworthiness)

Creditworthiness (also known as credit rating) refers to the probability that a potential borrower can provide the agreed interest and principal payments and repay the loan taken out.

German mortgage options are similar to other types of lending around the globe.

L

Laufzeit (Duration)

The term of a home loan comprises the period of time in which a loan is to be repaid and depends on factors such as the amount of repayment and interest rates.

M

Maklerprovision (Brokerage commission)

The broker's commission (also known as brokerage fee) is the fee that the broker receives from the buyer after successful brokerage of a property. With EverEstate no commission is charged.

R

Ratenpause (Installment break)

In the event of sudden job loss, major material damage, or unexpected changes in personal circumstances, it can be difficult to cover monthly credit costs. For this reason, many credit institutions offer their borrowers the possibility to pause repayment of their loan for an agreed period of time. However, fees usually apply here.

Restschuld (Remaining debt)

The residual debt describes the amount of a property financing that has not yet been repaid at a certain point in time. Usually there is still an open amount after the agreed fixed borrowing rate expires, which has to be repaid to the lender.

Using a financing calculator can help you determine your budget.

S

Sollzins (Borrowing rate)

The borrowing rate is calculated by the respective credit institution in accordance with the borrower's credit terms. It is based on external factors such as the current market situation (key interest rate), the fixed-interest period or loan amount as well as individual factors such as age or income situation.

Sollzinsbindung (Borrowing rate guarantee)

The borrowing rate guarantee ensures the best possible borrowing rate over a specified period. The most common period is 10 to 20 years.

Sondertilgung (Unscheduled repayment)

Unscheduled repayments are additional annual instalments of about 5 percent, which help to pay off the loan more quickly. For example, unexpected sums of money from inheritances or salary bonuses can be included here.

T

Tilgung (Repayment)

Repayment is understood to be the scheduled or unscheduled repayment of debts. The higher the initial repayment, the faster the remaining debt is repaid and the lower the interest burden. Experts recommend here: 2% or more.

Tilgungsdarlehen (Redemption loan)

In the case of the so-called redemption loan, a monthly repayment rate is first calculated by dividing the respective loan amount by the number of term months. This value is then added to the respective interest component, which decreases proportionally over time.

Rest assured that financing property in Germany doesn't have to be overcomplicated. We're here to help!

U

Umschuldung (Debt restructuring)

Debt restructuring is the conclusion of new real estate financing, which is particularly important in the case of an upcoming final financing. If the fixed borrowing rate expires, there are basically two options for financing the remaining debt. Either the existing loan agreement can be extended, or a new lender can be chosen.

V

Volltilgerdarlehen (Full repayment loan)

Buying real estate still pays off, as interest rates are lower than ever and often compensate for the increased purchase prices. A repayment loan appears to be particularly attractive, in which the loan term and the period until the loan is fully repaid are identical. After the end of the term, residual debt, follow-up financing, and thus also interest rate risk are all eliminated.

Vorfälligkeitsentgelt (Prepayment penalty)

A prepayment penalty is the amount that a borrower must pay in the event of an unscheduled termination of a long-term loan.

Z

Zins (Interest)

Interest comprises the fee paid by a debtor to the creditor in return for temporarily transferred capital.

Zwischendarlehen (Interim loan)

An interim loan is a means of bridging a financing gap; for example, if not enough equity capital is initially available when purchasing a property. The term of an interim loan is usually a maximum of two years.

Learn more

If you're interested in financing options for buying property in Germany, we are happy to help. You can contact us via the form below to learn more. To read about other important real estate terms and definitions, check out our real estate glossary!

Translated by Catherine Norris

Written by:

Ina Schulze

Ina’s heart beats for design, interior and the magic of the (written) word. She commutes between Leipzig and Berlin for love - and is always looking to discover new things about the cities for the EverEstate blog.

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