Are you thinking of taking out a home loan in Germany, but have no idea how to get one? Can't understand the loan simulations offered on real estate websites? It's perfectly normal: mortgages in Germany don't work quite like they do in France. Whether you're looking to invest in rental property, become a homeowner in Germany or buy land, a house or an apartment on the other side of the Rhine, discover the 5 differences between mortgages in Germany and in France!
1. The rate can be variable
The first major difference to be aware of is the very common practice of a variable borrowing rate. This means that, over the total term of the loan, you can define the length of time for which you want a certain rate to apply. This practice exists in France, but is very rare, and unlike France, there is no maximum ceiling on rate increases.
Short-term rates
For example, you can sign your first 10-year mortgage with a fixed rate. The advantage? Because you're «only» committing yourself for 10 years, the rate offered is generally very attractive. The downside? You'll have to negotiate a new home loan with a new rate, in 10 years' time, for the remaining years to be repaid, with no guarantee as to the state of the market at that time. You therefore take the risk to see your rate rise and therefore your deadlines increase.
Long-term rates
You prefer to play the safety ? In this case, you can set a fixed rate for a longer period, or even for your entire mortgage, as in France. The advantage? You know your monthly payments from the outset and control your real estate budget. The downside? Security comes at a price! The rates offered will be higher and your monthly payments will be higher, but stable.
Good to know: in Germany, the loan term is generally 10, 15 or 20 years. The rate varies according to various criteria: amount of down payment, type of property, fixed-rate term, etc.
Speaking of rates, you may be wondering whether you should wait until rates fall to buy? We discuss this question in detail in our article Mortgages in Germany: should you wait for rates to fall? - Expat Finance
2. Renegotiation is virtually impossible
Unlike in France, where it's common to renegotiate a mortgage to obtain a more attractive rate, reduce repayment times or change the amount of your mortgage payments, it's not possible to redefine a mortgage in Germany. You must therefore think carefully about the conditions of your loan before you sign. As part of this process, I'll help you take out a long-term mortgage that's tailor-made for you, taking into account 2 criteria :
- Safety. This is the fixed-rate period to choose (see first point). The longer the fixed-rate period you choose, the more you control your budget over the long term, but the rate is generally higher.
- Flexibility. Short maturities, possibility of early repayment, low intake You need to decide in advance how flexible you want your loan to be. Unlike in France, early repayment of a fixed-rate loan is expensive and subject to very specific conditions. Flexibility, however, is a criterion not to be overlooked, as it allows you to make decisions and carry out new projects without this preventing you from repaying your loan: baby project, resignation, investment, etc.
I can also help you choose the contribution amount, You'll need to take into account your personal situation: age, assets, type of property, etc. Based on all these criteria, a loan rate will be defined.
Are you wondering how long you should take out a mortgage, and what kind of downpayment you'll need? In my video, you'll learn about the three variables that help define a mortgage in Germany, so you can get a loan that's tailored to your personal, professional and financial situation.
3. Loan insurance is rarely compulsory
In France, a loan insurance is almost systematically requested when applying for a mortgage. It guarantees the bank payment of instalments in the event of death, d’disability or’inability to work for example. In Germany, loan insurance is rarely compulsory. However, it is advisable to take out loan insurance, which will protect you and your loved ones in the event of a problem. Be careful, however, because unlike in France, this insurance is not included in the cost of the mortgage. And don't forget to check whether this insurance is included in the various mortgage offers you receive, so you can make fair comparisons!
4. Counterparty demand from banks does not exist in Germany
In France, banks almost always ask for something in return for granting a mortgage. For example, you may be asked to domiciliate your income with this bank. In this way, the bank can offer you its services and make margins on products that are more attractive than home loans. In Germany, this practice does not exist. You can obtain a mortgage from a bank without being a customer, and keep your accounts domiciled elsewhere. A good point on this side of the Rhine!
5. Mortgages in Germany: beware of delays!
Visit deadlines when buying real estate are much shorter on the other side of the Rhine. In fact, once you've obtained your loan from the bank, you only have to 14 days to cancel. If the deed of sale is cancelled at the last minute and you have exceeded this deadline, you cannot cancel your mortgage in Germany! So you need to be sure that you'll get the property, and ideally plan to have the deed of sale notarized before the end of the loan cancellation period. The last important parameter to know: the sales agreement does not exist. The guarantee of obtaining the property is therefore limited. Planning the deed of sale and the loan application therefore requires organization! In fact, beyond the loan, the whole process of buying a property is very different on the other side of the Rhine. Read our article Buying real estate in Germany (primary residence) in 5 steps
If you live in Germany and would like French-language assistance with a mortgage in Germany, we can help. Contact Expat Finance !
We'll guide you step-by-step through the process of defining a credit package tailored to your needs, choosing the right mortgage and taking care of everything right up to the signing of the deed of sale.
