Buying a House in Germany: a Firsthand Ultimate Guide
Sometimes it still feels a bit surreal that we are buying a house in Germany. After years of saving and dreaming, we now have a home in the Black Forest to call our own. But buying a home in Germany as an expat is no easy task. Between understanding legal and purchasing norms to navigating the closing process, the road to homeownership in Germany can sometimes feel intimidating.
That’s why we thought we would share with you the top questions often asked by prospective homeowners and share our experience as a family who has recently navigated the home buying process in Germany.
Let’s get started.
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Learn how we did it here!
Is it Worth Buying a House in Germany?
Regardless of where you live in the world, the decision to buy a house is a major financial milestone that should be carefully planned and considered. And choosing to buy a house in Germany is no exception. However, to this question we respond with a resounding YES.
It’s no secret that the housing market in Germany has exploded in recent years. We often tell family and friends that the housing market in our home city of Freiburg is equivalent to San Francisco - highly competitive and expensive per square meter compared to more rural locations.
However, as time went on and we became increasingly rooted in the Black Forest, choosing to stop renting and buy a home in Germany became more and more of a practical decision. Despite high prices, at this time the interest rates in Germany are extremely low.
According to Stiftung Warentest, as long as the price of a property is still less than 25 times the annual rent, the historically low interest rates make purchasing a solid investment. As long as you stay below this price-rent ratio, it is achievable to have the repayments on your mortgage to be the same, or even less than what you would be paying to rent it.
Want to know how much house you can afford in Germany? Here is the best German mortgage calculator we have found... and used to buy our house!
Can a Foreigner Buy a House in Germany?
Absolutely! But it is worth noting that the requirements for purchasing a home in Germany as an expat or immigrant are going to be different than if you were a naturalized citizen, especially if you are from a Non-EU country.
Generally, this pertains to your individual “risk” that a German bank must calculate when calculating a mortgage offer.
For example, one of the biggest requirements that we were told was necessary to qualify for a mortgage in Germany was to get a permanent residence permit (Niederlassungerlaubnis) (NOT temporary, or Aufenthaltserlaubnis). As you can imagine, having greater job security, language fluency, and a longer work/living history in Germany are all strong qualifying factors for German banks.
How to Find Homes for Sale in Germany
We won’t sugar coat it, the competition for real estate in Germany is intense! It is not uncommon for many homebuyers in Germany to wait years before finding the right house or apartment and having their offer accepted.
If you want to be successful at buying a house in Germany, you will need to diversify your search tactics. Here are the resources that we found to be the most helpful to find a property for sale in Germany.
Searching Online Property Platforms
Whether you are renting or buying a house in Germany, there are a number of great online property platforms where you can browse current listings in your area. In addition to searching by price, you can also filter your results to fit your needs for size, number of rooms, location, and amenities.
Best Online Platforms to Search for Properties for Sale in Germany:
We found our German home through this online property platform and found the process to be very easy. However, because the market is very active for rentals and for-sale listings, you’ll want to check these listings daily.
Hire a Real Estate Agent
One of the most common methods by which properties are bought and sold in Germany is through a real estate agency (called a “Makler” in German).
For foreigners interested in buying a home in Germany, real estate agents can be a great source of support and guidance.
You can search for an “Immobilienmakler” ( or real estate agent) in your area by just doing a quick Google Search. Alternatively, you can also search the database of the German Real Estate Association (Immobilien Verband Deutschland).
Browse Local Listings in the Newspaper For German Homes for Sale
Don’t underestimate the power of local listings in your city or regional newspaper (Zeitung). This is especially true for properties which are listed for-sale-by-owner or ‘von privat’.
Additionally, your local newspaper may have an online database of local listings. Simply Google, “wohnung von Privat kaufen + your desired location”.
Banks or Financial Institutions in Germany
Last but certainly not least, in Germany it is very common for homes to be listed through local banking institutions. Especially with your local Sparkassen (savings banks), you can often find local properties for sale displayed in their storefront windows.
But beyond the convenience of buying a house in Germany from a local bank, there could potentially be financial incentives as well. Have you already established a relationship with this bank? You could potentially negotiate a better mortgage rate when you plan to finance your home in Germany.
Want to know how much house you can afford in Germany? Here is the best German mortgage calculator we have found... and used to buy our house!
How Much Does it Cost to Buy a House in Germany?
I don’t mean to be dismissive, but it’s true when I say that every housing market is different. Some German cities have metropolitan wide high housing prices. While other areas have huge price differences when you move just a couple of kilometers out of the city center. There are no hard and fast rules when it comes to housing prices in Germany.
However, there are a couple of general guidelines that we feel are important to know when buying a house in Germany.
#1 Houses are like Cars
Think of your impending home purchase like buying a car. New houses are likely to be more expensive than buying an older, “used” house. Unless of course you are buying a classic, vintage home. Stately properties with tall ceilings and a lot of ornate detail can also be expensive.
#2 Be Weary of DIY
Did you know that having appliances (such as a stove) NOT installed by a certified professional can actually void the warranty and insurance in Germany? It's true.
The same can be said about owners who choose to do-it-yourself when it comes to home renovations. Always ask for the receipt of work from a certified professional for any major home renovation while under contract on the property. If they are unable to provide one and/or choose to do the work themselves, it may be best to move on and keep looking.
You open yourself up to future liability and a lack of insurance coverage if a home repair or appliance fails that was not initially installed by a certified professional.
And while that home with a questionable repair record may be listed lower than comparable homes, it may end up costing you more in the long run.
#3 Cities are Expensive, So Look to the Suburbs
Again this is not a hard and fast rule for all of Germany. However, most major cities with 100,000+ residents are going to experience higher housing prices than the surrounding commuter towns.
This was one of the biggest motivations for us to move just outside of the city. By moving just 10km away, we could afford a home with a garage and a yard for the price of a small apartment in the city.
However, for the American readers in the audience - we will note that we found housing prices to be comparably very expensive. We often liken the housing market in our region to that of San Francisco, California.
#4 You Pay for Location & Convenience
Our last point may not necessarily be relative only to Germany, but it holds true nonetheless. Location plays a huge factor when it comes to the housing prices of properties in Germany.
Being close (but not TOO close) to public transit is a major selling factor for commuters. In addition, a local community’s school system, crime ratings, and proximity to parks and green space can all influence the listing price.
How Much Deposit Do I Need to Buy a House in Germany?
Technically speaking you don’t need to put anything down to buy a house in Germany, including the closing costs. However, that doesn’t mean that’s the best decision. You will likely get very high interest rates with unfavorable loan stipulations.
In our experience, we found that banks wanted to see two things from potential home buyers in order to secure a (good) home loan:
That you are able and willing to pay the closing costs out of pocket. (Read our section below on what all of these costs entail in Germany)
That you have 10% of the purchase price in available equity. Equity comes in many forms and you do not need to use all of it when purchasing the home. However, having this amount in equity lowers your overall “riskiness” to lend money to.
However, if you are serious about purchasing a home through a German banking institution, we strongly suggest making an appointment through an advisor like LoanLink24. Their English speaking consultants will advise you on your individual finances and will contact the banks for you and let you know what offers you have to choose from - all at no cost to you. We worked with LoanLink24 for the purchase of our home and it was 1000% worth it.
Want to know how much house you can afford in Germany? Here is the best German mortgage calculator we have found... and used to buy our house!
How Much Mortgage Can I Afford in Germany?
Ah yes, possibly the most important question of all: How much house can I afford in Germany?
There are a number of great mortgage calculators in Germany - we particularly liked this one. It is in English, filled with important data and very transparent. However, after speaking to our loan advisor from LoanLink24 we found that there is a really great guideline that many in the industry use:
General Rule: Monthly Net Income* (after-tax) X 120
*earners holding at least permanent residence in Germany
This is not a hard and fast rule, but can be used as a general guideline if you are starting to look at properties. The more you go above this amount, the more banks which will “walk away” from making you a loan offer.
And it is important to underscore that the banks will only consider the income earned by those holding a permanent residence permit in assessing your pre-qualification for the home loan. Even if you are married, only the spouse with permanent residence (Niederlassungserlaubnis) and not a temporary residence permit (Aufenthaltserlaubnis) can be counted.
Loans and Subsidies in Germany to Help With the Home Buying Process
Although housing prices in Germany are high, there are a number of government backed loans and subsidies that are aimed at encouraging homeownership in Germany.
KfW Loans & Subsidies in Germany
The KfW bank (Kreditanstalt für Wiedeaufbau) is an entity that provides numerous loans and subsidies for prospective homebuyers and existing homeowners who wish to make their properties more efficient. And the best part? KfW loans and subsidies can often be combined with each other and with third party mortgages. This is the route we ended up going with!
Let’s dive in deeper.
KfW 124 Home Ownership Program (Wohneigentumsprogramm)
Purchasing or building your own home in Germany? The KfW 124 gives borrowers up to 50,000 euros at a low annual interest rate (starting at 0.95%).
The homeownership program from the KfW supports the purchase or construction of owner-occupied properties. You can borrow up to 50,000 euros at a low annual interest rate, starting from 0.95%.
Importantly, you can apply this loan to not only the sale price, but also renovations, fees for mortgage advisors and closing costs like notary fees, or property transfer taxes. These are things not covered by most types of mortgages.
To apply for the KfW 124 loan, we recommend consulting with a “financing partner” (Finanzierungpartner), such as your German bank, insurance advisor or financial advisor such as LoanLink24. These financing partners will apply to the KfW on your behalf during the prequalification process. Applications must be completed before you purchase the property or construction begins (if applicable). We used LoanLink24 to handle this for us for free, we didn't have to do anything.
KfW 153 energy-efficient building loan (Energieeffizient Bauen)
Interested in going green? The KfW 153 loan gives borrowers up to 100,000 euros at a low interest rate (from 1,06%) to construct or purchase an energy-efficient home.
For existing properties - When applying for this loan you will need to consult with an energy efficiency expert, who can help you determine whether your property meets the requirements for the loan.
For new construction - You and the construction company will need to agree to an energy efficiency standard which meets the requirement of the loan. You will also need to organize an energy audit by an energy efficiency expert upon completion of the construction. Anticipate paying for the audit services out of pocket.
Example: The KfW 55 Program
Have you seen a listing for a new construction property advertising KfW 55 status? Here’s what this means and how you can get both a low interest rate loan AND a subsidy for your new home.
In the case of a new building, you can team up with a property developer who plans certain packages of measures to turn the house into a KfW 55 house. If the standards are met, you are eligible for both a low-interest loan of up to 120,000 euros per apartment/house/unit, with which you can choose between various fixed interest rates and terms.
In addition, you are also eligible for a one-time repayment allowance for your investment costs that you don't have to pay back. This grant is deducted directly from the remaining debt (AKA the principle of your loan) and amounts to up to 18,000 euros for a KfW 55 house.
Of course, you could always go for even higher efficiency with a KfW 40 or KfW 40 plus house (you can read more here about the different standards here). Here is the general break down of the KFW Program in Germany:
| Efficiency Home Standard | Loan from the KfW 153 | Grant from the KfW |
|---|---|---|
| KfW 40 plus | Up to € 120,000 per apartment | 25% of the loan amount, up to 30,000 EUR |
| KfW 40 | Up to € 120,000 per apartment | 20% of the loan amount, up to 24,000 EUR |
| KfW 55 | Up to € 120,000 per apartment | 15% of the loan amount, up to 18,000 EUR |
In other words, the amount of the possible loan amount is always the same, but the grants increase if you choose a higher standard.
In our new home, we applied for both the KfW 153 loan and grant since our home was to be completed for the KfW 55 standard. The loan was able to be combined with other financing through our banking institution. However, in order to get the grant, we had to agree to pay for an energy audit (out of pocket) of our new home once the construction is completed. For reference, this amounted to approximately 1,800 euros. LoanLink24 handled the loan search, application, paperwork and all of the communication for us. We highly recommend using them to handle this.
KfW 424 child benefit for homeowners (Baukindergeld)
First-time home buyer and a family? This grant from the KfW provides borrowers 1,200 euros per year per child, for a maximum of 10 years (12,000 euros in total). Plus, for every additional child, you receive a bonus of up to 15,000 euros.
To be eligible for the KfW 424, you must be entitled to child benefit (Kindergeld) and have a combined yearly income that does not exceed 90.000 euros.
Exclusions to all KfW Loans and Subsidies
The KfW loans and subsidies cannot be used for:
Vacation homes
Refinancing or extending existing mortgages
Buy-to-rent properties (KfW 124 loan only)
Maintenance or additions to a property you already own (KfW 124 loan only)
Do you need to transfer money from your home country to Germany? We highly recommend using Wise for their low fees and the real exchange rate. It can actually be 6X cheaper than with a standard bank transfer.
Are There English Speaking Mortgages in Germany?
If you are buying a house in Germany from a German bank, your mortgage contract will come to you in German. And it will be up to you to take the time to translate the document and understand the stipulations.
However, there are a number of mortgage consultants that operate in English to make the home purchasing process easy for expats. We used a mortgage service called LoanLink24. She gave us invaluable advice about our financing and helped answer any questions we had along the way. Which, let's be honest, was about 10,000 questions.
Once more, LoanLink24 is a service that is 100% free. They only make a commission from the banks if they close a loan with you. They are there to be your liaison; helping facilitate the mountains of paperwork and gather loan offers from multiple banking institutions.
Additional Costs to Be Aware of When Buying a House in Germany
Makler or Provision Fees : 3.5% - 7% plus VAT of the purchase price.
If you are buying an existing home in Germany, you should anticipate paying a ‘makler or provision’ fee as part of the closing costs. This fee is usually calculated at 3.5% to 7% of the property price and is the equivalent of a real estate broker fee.
However, it is possible to find some homes for sale directly from the seller (think FSBO in the United States). In this scenario you may be able to skip this extra fee entirely. However, because of the intense market and legal requirements, such properties are rare to find in Germany.
In addition, new construction projects where you purchase directly from the developer are also often makler or provision free. This was the route we went when buying our house in Germany and it saved us tens of thousands of euros.
Real estate transfer tax/stamp duty: 3.5% – 6.5% of the purchase price
Real estate transfer tax/stamp duty (Grunderwerbsteuer) applies to all properties purchased in Germany. This property transfer tax that you need to pay to the government and is calculated as the value of the land and all permanent parts of the property, such as physical building structures.
However this cost varies greatly from state to state and could be potentially very expensive. It's important to take this real estate transfer tax into account when calculating your budget.
You will typically receive a German stamp duty assessment four to eight weeks after the notary appointment. Once you know how much to pay, you must act quickly and pay within one month. If for whatever reason you do not pay this tax, the land register will not list the property as belonging to you.
Notary Fee (Notargebühren): 2% of the purchase price
This fee covers the preparation of the contract, negotiations, the signing ceremony and entry in the land register.
Lawyer, Translation and Interpreter Fees
Unsurprisingly, your new German home will come with a contract which will be written in German. However if you are a foreigner buying a house in Germany, you may want to consider getting it translated.
Even for native speakers, legal documents can be cumbersome. If you are not a native level German speaker, then you should absolutely make sure you understand each and every word of the contract BEFORE signing the dotted line.
If you wish, your notary can organise a translation and interpretation of your contract in your native language. However you should anticipate paying for this service. Alternatively you could also pay to have a lawyer look over the contract document before you sign.
In our experience, we contacted the Notary one month before closing and relayed that our understanding of German was at a B1 level. After a telephone call (in German) he felt comfortable that we could communicate and understand each other where a translator was not needed. However, we painstakingly translated the 92 page contract at home before our appointment.
Factors that Could Affect Your Application for a Mortgage in Germany
Unfortunately, simply having a large paycheck is not enough to guarantee a good mortgage in Germany. Here are some factors which could affect your application for a mortgage in Germany.
Age
If you are older and closer to retirement, you are considered riskier by the banks. Therefore, you could face a higher down payment rate or a shorter overall mortgage length compared to a younger person.
Employment Status
Are you a student? Do you have a limited work contract (2 years, 5 years, etc.) or are you on a probation period? Unfortunately, most banks will only give you a mortgage if you have an unlimited employment contract.
Earnings
It almost goes without saying, but the higher your income, the less risky you are to the banking institutions. Be prepared to show evidence of your savings and at least 3 months of payslips (Gehaltsabrechnung). If you are self-employed, the banks will also like to see your tax and bookkeeping documents.
Debt to Asset Ratio
Along with a healthy income, you’re also going to be assessed on how well you manage your assets and debts. The more assets and the less debt the better.
Part of this assessment will also include a healthy SCHUFA score (kind of like a FICO score in the USA). The bank will request this directly, all you need to do is sign a waiver form providing consent for it to be acquired.
Residency status
As we mentioned prior in this article, you will need to secure a permanent residence permit (Niederlassungserlaubnis) if buying a house in Germany as an expat.
However, if you only have a Blue card, most German banks will only give you a mortgage if you put more than 25% of the house price as a down payment. And remember, this downpayment is in addition to the closing costs that we mention in the section above.
Want to know how much house you can afford in Germany? Here is the best German mortgage calculator we have found... and used to buy our house!
Frequently Asked Questions
Can foreigners buy property in Germany to get a German Visa?
While some countries like Greece, Spain and Portugal offer up permanent residence visas for foreign property owners, Germany is not one of them. In fact, we found the exact opposite was necessary. We were told by our mortgage broker that permanent residence status or Niederlassungerlaubnis (NOT temporary, or Aufenthaltserlaubnis) was necessary to secure a home loan in Germany. If you're considering buying a house in Germany, you will need to live and work there for a while.
Can I finance the closing costs of a home in Germany?
Yes, but ...the better question would be whether or not you should. Most banks like to see that you can pay for the closing costs with your own private equity as part of establishing your credit worthiness.
While most banks will not let you finance your closing costs as part of the home mortgage, technically you could take out a private loan to cover your closing costs. However, a private loan is very different from a home loan. Anticipate a higher interest rate and a quicker repayment period.
Also, it is not uncommon to have your bank raise your primary home loan interest rate because financing closing costs could make you appear “riskier”.
Who do you recommend going through for a mortgage in Germany?
We reached out to HypoFriend and LoanLink24 when we were starting to home buying process in Germany. However, from our experience, we found LoanLink24 to be more transparent and better with communication. Moreover, their calculator that helped us understand what we could afford was far more robust and accurate.
Our mortgage advisor Sarah was fantastic and we would strongly suggest that anyone interested in buying a home in Germany use LoanLink24 to gather loan offers.
Can I include international assets to prove equity for a home loan in Germany?
Generally speaking, no. German banks will want to see that you have funds available in Germany in order to secure your mortgage. And truthfully, you should have a German bank account long before you want to apply for a home loan.
That being said, our bank did allow us to submit statements from our second bank account in the US to show equity. Our financial advisor said that an exception can sometimes be made for the dollar over smaller, more variable currencies. We suggest speaking with a financial advisor to discuss your individual needs.
We highly recommend using the money transfer service called Wise to transfer your funds to Germany. Fees are very low and they always use the current exchange rate.
