Mortgage needs to be thought through. After all, for most people, it is the biggest financial project of their live. It is therefore important to correctly assess your own financial strength and all costs incurred in advance. Certain conditions and funding opportunities should be taken into account. Here you can find out more about specifics and complexities of a home loan in Germany.  

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Being ready is everything – How to best prepare for a home loan 

You need to take into account all ancillary costs that are incurred once when purchasing a property. These include:
Real estate transfer tax: Depending on the federal state, 3.5 % to 6.5 % of the purchase price
Notary costs: Estimated 1 % of the purchase price
Land register entry: approx. 0.5 % of the purchase price
Development costs: Only relevant for those who are biulding a house. Properties under construction still need to be connected to the electricity, water, telecommunications, gas and sewerage networks. The municipalities can demand that you cover up to 90 % of the costs.
Moving costs: Are incurred if you hire a moving company. Here you should calculate in about 500 to 2,000 €.
Brokerage fee: This can amount to up to just over 7 % of the purchase price. 
Renovation costs: Depending on the respective effort, these costs must also be taken into account.
Furthermore, it is also necessary to include the running costs for the maintenance of the residential property in the evaluation. These include:
Electricity, water, gas: Keep in mind that due to the transformation of the energy policy and the associated tax increases or the possible introduction of new taxes, rising costs in this area can be expected in the coming years. 
Property tax: In contrast to the one-time real estate transfer tax, the property tax is due every year. It is collected by the municipalities and is the national average of just under € 134.
Maintenance costs: You may also have to take into account maintenance and repair costs for heating or solar systems.


If you only look at the purchase price of a property, you do not have the entire cost structure in view. It is absolutely necessary to look at the ancillary cost to be able to correctly estimate the total financial outlay. 

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Consider ancillary costs

The most important basis for a home loan is a fixed and regular income of an appropriate amount. But what does "at an appropriate level" mean? When it comes to a mortgage, there is a rule of thumb that states that the monthly costs should not exceed 40 % of net income.

Somewhat more difficult is the calculation with less regulated income. Self-employed people, for example, who are still in the start-up phase, find it difficult to estimate future cash inflows. In case of doubt, a more conservative cuatious estimate of your own income is recommended.

However, it is not only income that is crutial when assessing one's own financial strength. Equity also plays an important role. This includes assets, such as e.g. cash reserves, shares, bonds, home savings contracts, insurance, existing real estate and land.

While income is set a percentage limit of 40 % of the net amount, which the monthly mortgage costs should not exceed, in the area of equity you can set a minimum of 25 % of the total costs that should be covered by equity. So if you as a self-employed person can not necessarily rely on a fixed monthly income, you still have realistic chances of a construction loan if you have a correspondingly high equity capital. 

Most importantly is that you do not overestimate your own financial strength, but really evalauate it realistically. This first step is the basis for the further path towards suitable home loan.


The most important basis for a home loan is a fixed and regular income of an appropriate amount. But what does "at an appropriate level" mean? When it comes to a mortgage, there is a rule of thumb that states that the monthly costs should not exceed 40 % of net income.

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Correctly assess your own financial strength

The most important insurance for homeowners are:
Residential building insurance: Covers claims in case of a damage to the building due to storms or fire. Useful additional components can be included into the contract (photovoltaic system as well as a glass demage). 
Natural hazard insurance: Natural hazards such as hail, storms, flood disasters, earthquakes, etc. are covered here.
Private liability: Covers consequential costs for damages for which you are responsible. The special home liability insurance covers costs resulting from an accident on your property, e.g. if someone slips during winter on your property because you have not fulfilled your duty to clear the snow.
Household insurance: All household insurances cover against fire, tap water, burglary, theft, vandalism and the forces of nature.


A new home needs to be well protected against fire, storm, burglary, vandalism and natural hazards. 

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Insurances

This means you need to look at more factors loan duration and interest rates. The conditions and cost factors already mentioned must also be evaluated. Only then is it clear how good a certain offer really is. But with BayHyp you have a reliable and competent partner at your side, on whom you can rely at any time.

It is always advisable to get several offers and then compare them. However, the offers of the various loan providers must then really be comparable.

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Compare offers

In this case, in addition to the usual repayment installments, you can also make special payments. Thus, you shorten the overall term of your loan. This has the advantage that you reduce the total interest burden of a mortgage.
Another cost factor that is often overlooked is provision interest. These occur when you loan is available, but you are not ready to use it. Lenders then charge this form of interest as a kind of "compensation payment" for having provided you with the agreed sum of money but not yet being able to make a profit from it. Because if you do not use the provided loan amount, no interest will be charged. So the loan is like "dead capital" for the bank, which yields nothing. For this reason, there is provision interest.
In which cases can this interest be charged? Suppose you have your mortgage arranged, but there are disagreements in the negotiations between you and the seller of a property. In such a case, some time may pass before the loan is actually called up.
Normally, however, you will be granted a provision interest-free period of about six to twelve months. After this period, the provision interest will then be charged. Here it is important to inform yourself in advance how high the provision interest is and how long the provision interest-free period is. As a rule, the provision interest rates are above the regular interest rate of your loan. Therefore, it is worth taking a closer look at this topic in advance.
Attention should also be paid to a possible pre-payment penalty. If, for some reason, you want to re-pay your home loan early, then a prepayment penalty will apply. Similar to the provision interest, this compensation payment also acts as a kind of "compensation". However, there are limits set by the EU: With a remaining term of more than one year, the prepayment penalty may not exceed 1 % of the remaining debt. Under one year, the maximum value is 0.5 % of the remaining debt.


As a rule, you repay your loan in monthly constant installments. However, you can also agree on a so-called "special repayment right" with your bank. 

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Right to special repayment, provision interest and prepayment penalty

The best known of all promotional institutions is probably the Kreditanstalt für Wiederaufbau (KfW for short). If you want to buy a property or build a home, you basically have the option of taking advantage of KfW's residential property program. The interest rate for the promotional loan is already available from 0.76% p.a. This is valid for an amount of up to € 150,000.
New buildings are funded if you have purchased a building plot no more than six months before receipt of the funding application. Excluded, however, are holiday homes, debt restructuring, refinance projects, rented or leased areas and expansion measures on owner-occupied residential property.
The promotional banks and institutes of the federal states also offer home promotion programs. However, the requirements and conditions vary from state to state.
In addition to these offers, families with children were still entitled to the so-called Baukindergeld when they first purchased a property until 31 March 2021. However, this expired, i.e. an application for Baukindergeld can only be successfully submitted if the purchase contract has been signed by 31 March 2021 at the latest.


There are several funding options for builders and home buyers: KfW, promotional banks of the federal states and Baukindergeld. It can be a good opportunuty to save money.

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Exploring funding opportunities

A long fixed interest rate is always advantageous if you conclude a mortgage in a low-interest phase and a further decline in the interest rate level is unlikely. You then secure a favorable interest rate for a longer period of time and therefore do not have to worry about rising financing costs as a result of interest rate fluctuations during this time.
In principle, the credit institutions offer you a minimum interest period of five years. Of course, longer periods of 10 to 30 years can also be guaranteed. In these cases, however, a higher interest rate is to be expected.
A short fixed interest period, on the other hand, makes sense if you conclude your mortgage in a high-interest phase and you can expect interest rates to fall again in the foreseeable future. Then you can benefit from the fallen interest rates again after the fixed interest rate. Another advantage: The shorter the fixed interest period, the lower the repayment installments. Disadvantage: If interest rates rise contrary to expectations, then you have virtually "speculated" and must expect rising costs after the fixed interest rate. In addition, the remaining debt amount will still be relatively high after the end of a short borrowing rate commitment.
In addition to the fixed interest rate, you should also deal with the repayment. After signing a mortgage contract, you pay monthly repayment installments to your bank in the same amount. As a rule of thumb, the minimum repayment rate should definitely be 1 %. However, you must then note that a low repayment rate will result in a comparatively long repayment period.
In addition, you should also think of the risk of rising interest rates already mentioned above. Due to the long repayment period of your loan, the probability also increases that you have to expect rising interest rates in the follow-up financing. Therefore, the choice of a higher repayment rate is recommended. Of course, this should always be within your financial capacities and in no case limit your living budget too much.



Fixed interest means that a certain fixed interest rate is guaranteed by your mortgage lender for the duration of a predetermined period of time. During this time, the interest rate does not change, no matter how the interest rates in the market develop in the meantime. The interest is therefore linked to this agreement.

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Keep an eye on fixed interest rates and repayment rates

A forward loan is, in a sense, a "bet" on rising interest rates. This type of a loan takes effect after the end of the motgage commitment. You can set a follow-up financing up to five years in advance and thus secure the low interest rate level of your previous mortgage. It therefore offers you a certain degree of security.
However, a deal is only worthwhile if you expect interest rates to rise in the future. If, on the other hand, the interest rate level drops, then a forward loan would not have been worthwhile for you, because then your loan interest rate would be above the general interest rate level. However, it must also be taken into account that the banks charge an interest rate premium on this form of loan. Its amoun increases with the duration of the lead time.


After the end of the fixed interest rate, it is important to find a follow-up financing with the favorable conditions. This is where the forward loan comes into play. 

Advisor