Getting a mortgage with no deposit

Zero-down property financing

Are mortgages without deposits better?

We have 35 years of solid real estate expertise combined with a great deal of know-how in the field of property financing. Our venture with Knight Frank, one of the largest independent real estate service providers worldwide, means that we can offer fully digitised apartment-buying services in Germany to English-speaking clients globally. One of the questions that is frequently put to us is, “What mortgage can I afford, and will I need a deposit in Germany?” Read on to find out the essentials of mortgages without deposits today.

What is a mortgage deposit?

The amount of capital you can borrow from a mortgage lender will vary according to your particular circumstances. In Germany, this is much the same as it is in any other Western country. The amount you earn will play a part in the decision as well as your age and other factors, such as any unsecured debt you may have. If you cannot borrow the full sum that you need to purchase an apartment in Germany, you will need to make up the shortfall. Essentially, this is what a mortgage deposit is: the sum the buyer needs to lay down before the mortgage lender will cover the remainder of the capital costs of the purchase.

No-deposit mortgages in Germany

The good news is that getting a mortgage in Germany is possible for all residents and you do not have to be a German, or even an EU, citizen to obtain one. Indeed, there are virtually no restrictions on foreigners buying real estate in Germany at all. That said, most residents are restricted by high street German mortgage lenders to a maximum of 80 per cent of the value of the property concerned. What's more, borrowers need to have a household income of €20,000 or more and their repayments must not exceed 35 per cent of their monthly salary. Non-residents often face further restrictions and will usually only be able to borrow up to 60 per cent of their intended purchase price. Either way, a self-disclosure questionnaire, known as a Selbstauskunft, will need to be filled out with any mortgage application.

Saving for a deposit

If you are arranging financing via a mortgage and need to save up for a down payment on a property in Germany, then try to set aside a regular sum each month that you can commit to. Of course, you can always put more into your savings, but setting yourself a minimum monthly amount will help you adjust to the regular payments you'll need to make as a homeowner. One of the best ways to do this is to set up a standing order from your current account into a savings account each month. Of course, saving for a deposit is much harder if you are spending too much in the first place. Clear any unsecured debt you may have, such as credit card bills, as soon as possible because the interest charges on them will hamper your attempts to build up a deposit. Limit your expenditure on entertainment and have a good look at your belongings to see if you can do without any. Of course, selling items you don't need will help up to build up your deposit sooner than merely setting money aside from your income.

Learn more about saving for a down payment

Requirements for financing

That said, in some cases, saving up for a deposit is simply not going to be possible. People who are already spending all of their available income on rent, for example, may only be able to save only very small sums, if anything. So long as they have a steady income that can be proven from self-employment earnings or payslips on a Selbstauskunft, then a zero-deposit mortgage may be an option. Of course, you need to know how to get a mortgage with no deposit in the first place for this to be a viable option. It will often mean turning to a specialist mortgage lender rather than a high street bank or building society. Our financial advisors can help in this regard.

Risks and state subsidies

The risks associated with mortgages without deposits include the fact that you are more likely to fall directly into negative equity should market conditions shift. In the worst cases, these extra risks can lead to a greater likelihood of home repossession. Nevertheless, they suit some people who need that bit of extra help to get them on the property ladder. In addition, it is worth mentioning that the Baukindergeld scheme will help first-time buyers with children. This help-to-buy scheme is similar to other ones in Europe, including the UK. It is effectively a state aid grant which allows buyers to obtain sums of €1,200 per child over a period of up to 10 years. It is available for houses and apartments but is not suited to people who have previously owned property. New builds and existing properties can be bought under the help-to-buy scheme, but it is not on offer for renovation projects.

Learn more about state subsidies in Germany

Coming to a decision

If you buy a property without a deposit, then it may make it more affordable. If the other option is continuing to pay rent every month, then going down this route can be very appealing. It also means you won't have to wait so long to buy your home – saving up for a deposit can take a considerable amount of time, after all. Indeed, if your mortgage repayments end up being lower than your current rental charges, then it may make simple economic sense to opt for a 100 percent mortgage instead. On the other hand, saving for a deposit will help you budget and prove that paying off a mortgage is something you can financially commit to. In addition, the sum you will need to repay will necessarily be lower because you have already covered a proportion of the sum needed to buy the property. Furthermore, if you do not see the capital appreciation you are looking for in your property, then you will not fall into negative equity as soon as you would with a mortgage with no deposit. It is for these reasons that, generally speaking, mortgage lenders will offer lower interest rates to borrowers who have a deposit than those who do not.

With our help, choose a mortgage that fits

To conclude, there are pros and cons to obtaining a mortgage in Germany without a deposit. There are some grants available to first-time buyers which may help, but what you really need for a mortgage without a deposit is expert financial advice, so you'll obtain the financing you need without overcommitting yourself.

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Olaf Grumm
Head of Finance Consulting
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