What is a mortgage?
A mortgage (in German: Baufinanzierung, also called a property loan) is a loan earmarked for buying or building a property. Unlike instalment loans, much larger sums are financed over longer periods.
- Land charge (Grundpfandrecht): The property serves as collateral
- Fixed-rate period: Fixed interest usually for 5–20 years, up to 30 years at some banks
- Repayment: Typically 1–5% initial repayment p.a.
- Term: Usually 20–35 years until fully repaid
Rates & terms
Mortgage rates depend mainly on the fixed-rate period, the loan-to-value ratio (loan relative to property value), your credit rating and the interest level on the capital market. In our comparison (€300,000, 10-year fixed rate, 2% repayment, 80% loan-to-value) the lowest fixed borrowing rate is currently 3.53%.
Rules of thumb: longer fixed-rate periods usually cost a premium but give you planning certainty. The more equity you contribute, the lower the rate – noticeable steps often come at 60%, 80% and 90% loan-to-value. Besides the borrowing rate, the effective rate includes other price-determining costs and is the right yardstick for comparison.
Terms compared (as of September 2026)
Terms maintained by us for the intermediaries in the partner programme; rates differ for fixed-rate periods of 5, 15 or 20 years – the provider will quote your individual terms.
Intermediary or direct to the bank?
Mortgage intermediaries compare the offers of many banks and are paid by the bank; advice is normally free for you. A direct bank or your own bank can still occasionally be cheaper – a counter-offer is worth getting.
Dr. Klein
Dr. Klein (Dr. Klein Privatkunden AG, Lübeck) says it compares property loans from around 600 banking partners and advises at more than 240 locations.
Interhyp
Interhyp (Interhyp AG, Munich) describes itself as Germany's largest intermediary for private mortgages, says it compares around 500 partners and advises digitally as well as at more than 140 locations.
Financing tips
7 important tips
- Equity: At least cover the purchase costs (notary, land registry, transfer tax, agent) yourself, ideally plus 10–20% of the purchase price
- Fixed-rate period: A long fixed-rate period gives planning certainty; after 10 years you may terminate with six months' notice anyway (§ 489 BGB)
- Repayment: Choose an initial repayment of at least 2%
- Special repayments: Agree free extra repayments (often 5% of the loan amount per year)
- Compare: Get several offers and compare the effective rate
- Commitment fees: For new builds, look for a long commitment-fee-free period
- Check subsidies: Apply for KfW programmes (the state development bank) and regional grants before signing the purchase contract or starting construction
What a mortgage costs besides the interest
On top of the purchase price come acquisition costs, which you generally have to pay from your own equity because banks are reluctant to finance them. Real estate transfer tax (Grunderwerbsteuer) is set by the federal states and, depending on the state, lies between 3.5% and 6.5% of the purchase price. For the notary and the land registry, a rough allowance is 1.5 to 2% of the purchase price. If an estate agent is involved, then since December 2020 section 656c of the German Civil Code (BGB) allows the commission on flats and houses for consumers to be split only equally between buyer and seller.
A worked example with freely chosen sample values: for a purchase price of €400,000 in a state with 6.5% transfer tax, the tax is €26,000, plus around €8,000 for the notary and land registry. That is roughly €34,000 of costs before any agent's commission. If you also contribute 10% of the purchase price as equity, you need about €74,000 of your own funds and finance €326,000. Always check whether the loan amount in your offer already covers the acquisition costs.
Running costs matter too: buildings insurance, property tax, a maintenance reserve and, for flats, the monthly service charge. As a rule of thumb, experts often mention €1 to €1.50 per square metre of living space per month for maintenance; this is a rough guide, not a binding figure. These items belong in your household budget, because the bank checks under section 505a BGB whether you can service the loan on a lasting basis.
Understanding instalment, repayment and remaining balance
Most mortgages are annuity loans: throughout the fixed-rate period you pay a constant instalment made up of interest and repayment. At first the instalment consists mostly of interest; as the balance falls, the repayment share grows. In simplified terms, the monthly instalment is the loan amount times the sum of the borrowing rate and the initial repayment rate, divided by twelve.
Worked example with sample values, not current offers: with a €300,000 loan, a 3.5% borrowing rate and 2% initial repayment, the annual payment is 5.5% of €300,000, i.e. €16,500 or €1,375 a month. In the first year about €10,500 of this is interest and €6,000 is repayment. After a ten-year fixed-rate period the remaining balance is, in this approximation, around €230,000. That amount then has to be refinanced on the terms of the follow-on financing.
If you raise the repayment to 3%, the instalment rises to €1,625 a month, but the remaining balance after ten years falls noticeably. With the calculator above you can test how repayment and fixed-rate period affect the instalment and remaining balance using current offer data. The key is that the instalment stays affordable if your circumstances change, for instance during parental leave or if rates rise at refinancing.
Fixed-rate period, refinancing and termination
During the fixed-rate period you generally cannot terminate the loan in the ordinary way. Section 489(1) no. 2 BGB provides an exception: after ten years you may terminate with six months' notice, even if the fixed-rate period is longer. For fixed-rate periods shorter than ten years, the commitment simply ends when the agreed period expires. You then choose between refinancing, an extension with your current bank or a switch to another lender.
If you want to leave earlier, for example when selling the property, expect a prepayment penalty. It is regulated in section 490(2) BGB and compensates the bank for its interest loss. Ask for a transparent calculation. A forward loan secures the conditions for refinancing before the fixed-rate period ends; banks charge a premium depending on the lead time, which must be shown in the offer.
Where possible, also agree a special repayment option and the ability to change the repayment rate later. At some lenders both cost a small interest premium, but they can save more than they cost. For new builds, commitment fees apply to amounts not yet drawn once the commitment-fee-free period has expired.
The financing process step by step
Start with a household budget and decide what monthly instalment you can afford in the long term. Then collect documents such as proof of income, a self-disclosure, proof of equity and property documents. With these you obtain several offers and compare the effective rate, which must be stated under the German Price Indication Ordinance and, besides the borrowing rate, includes further price-determining costs.
After approval the bank assesses the property and draws up the loan agreement. As a consumer you have a 14-day right of withdrawal under section 495 BGB; the period only starts once you have received all the mandatory information. The bank secures the loan with a land charge (Grundschuld) in the land register, which a notary certifies. Only when the priority notice for the conveyance is registered and all conditions are met does the bank pay out. Allow several weeks for the whole process so that you do not accept a worse offer under time pressure.
