How high should the monthly mortgage payment be?

A common rule of thumb is that your monthly mortgage payment should not exceed 35% of your household net income. For a net income of 4,000 EUR, that would be a maximum of 1,400 EUR per month. Many financial advisors recommend staying at 30% to maintain a buffer for unexpected expenses, repairs, or temporary income loss. Additionally, keep at least 3 monthly payments as an emergency reserve.

What is the minimum equity I need?

Ideally, you should bring 20-30% of the purchase price as equity. At a minimum, purchase costs (8-15% depending on the federal state) must be covered with your own funds, as banks typically do not finance these. A 100% mortgage without equity is possible with some banks but comes with significantly higher interest rates and greater risk. The more equity you contribute, the better your interest rate conditions will be.

What are purchase costs and how high are they?

Purchase costs are additional costs on top of the property price that apply to every real estate transaction. They consist of: property transfer tax (3.5-6.5% depending on the federal state), notary and land registry fees (approx. 1.5-2%), and potentially broker fees (3.57-7.14% incl. VAT). In total, expect 8-15% of the purchase price in additional costs. These should be paid entirely from equity, as they do not increase the property value.

What is the difference between nominal and effective interest rate?

The nominal interest rate (Sollzins) is the pure interest rate the bank charges for the loan. The effective interest rate (Effektivzins) additionally includes all other costs such as processing fees, account management fees, and the effect of repayment scheduling. The effective rate is therefore always slightly higher than the nominal rate and reflects the true annual cost of the loan. Always compare offers based on the effective interest rate, as only this allows a fair comparison.

Is a longer fixed-rate period worth it?

A longer fixed-rate period (e.g., 15 or 20 years instead of 10) typically costs a rate premium of 0.2-0.5 percentage points. In return, it protects against rising interest rates and provides planning certainty over a longer period. In a low-interest-rate environment, a long fixed-rate period is particularly advisable as you lock in favorable conditions long-term. When rates are high, a shorter period may make more sense if you expect rates to fall.

What happens when the fixed-rate period ends?

When the fixed-rate period expires, the remaining debt must be refinanced - this is called Anschlussfinanzierung. You can request a new offer from your current bank (prolongation) or switch to a different bank (refinancing). The follow-up financing is then at the current market rate, which may be higher or lower. With a forward loan (Forward-Darlehen), you can lock in favorable rates for your refinancing up to 5 years in advance.

How much do I save with extra repayments?

Extra repayments can significantly reduce interest costs. Example: On a loan of 300,000 EUR at 3.5% interest and 2% repayment, an annual extra repayment of 5,000 EUR saves tens of thousands of euros in interest over the full loan term. At the same time, the loan term is shortened by several years. Most contracts allow 5-10% extra repayment per year. Use this option whenever you have the financial flexibility.

Can I buy a property without equity?

Yes, some banks offer 100% financing or even 110% financing (including purchase costs). However, interest rates for full financing are significantly higher - often 0.5-1.0 percentage points above the rate with 20% equity. The risk is also greater: if property values decline, you could quickly owe more than the property is worth. Full financing should only be considered if you have a high, stable income.

What subsidies are available for home buyers in 2026?

Germany offers various subsidy programs: KfW provides low-interest loans for energy-efficient construction and renovation (e.g., KfW program 261). For families with children, there are successor programs to the Baukindergeld that vary by federal state. Additionally, some federal states support the purchase of owner-occupied housing with their own programs. Check with your municipality and KfW for current funding opportunities.

How does the repayment rate affect the loan term?

The repayment rate has an enormous impact on the total loan term. At an interest rate of 3.5%, it takes about 46 years to fully repay the loan with an initial repayment rate of 1%. With 2% repayment, it takes about 30 years, and with 3% repayment only about 24 years. Each additional percentage point of repayment saves tens of thousands of euros in interest over the loan term. A minimum initial repayment rate of 2%, ideally 3%, is recommended.

Extra Repayments: Are They Worth It? Calculator + Strategy | Mortgage Calculator

Extra Repayments: The Turbo for Your Mortgage

Extra repayments (Sondertilgungen) are voluntary payments beyond the regular monthly installment that are credited directly against the outstanding loan balance. They are one of the most effective tools for reducing the total cost of a mortgage and significantly shortening the loan term. In this article, you will learn how extra repayments work, when they are particularly worthwhile, and what the optimal strategy looks like.

How Extra Repayments Work

With a German annuity mortgage (Annuitaetendarlehen) with a fixed monthly payment, each installment consists of an interest portion and a repayment portion. Interest is calculated on the current remaining balance. An extra repayment reduces this balance immediately, which means less interest is charged in the next calculation period. The saved interest amount then flows into repayment, triggering a compound interest effect: the earlier the extra repayment is made, the greater the savings impact.

Most German mortgage contracts allow annual extra repayments of 5 to 10 percent of the original loan amount. On a loan of 300,000 euros, that is 15,000 to 30,000 euros per year. Some banks offer 20 percent or even flexible extra repayments without percentage limits, though often with a small interest rate premium of 0.05 to 0.15 percentage points. Before signing your contract, evaluate which extra repayment option makes sense for your situation.

Worked Example: How Much You Save

Consider a loan of 300,000 euros at 3.5 percent nominal interest and 2 percent initial repayment. The monthly payment is 1,375 euros, and without extra repayments the loan is fully repaid after approximately 30 years. The total interest paid amounts to roughly 196,000 euros. With an annual extra repayment of 5,000 euros, the term shortens to about 23 years, and total interest drops to approximately 139,000 euros. That saves you around 57,000 euros in interest and makes you debt-free seven years earlier.

With an annual extra repayment of 10,000 euros, the loan is paid off in approximately 19 years, with total interest of about 107,000 euros. The interest savings compared to the scenario without extra repayments amounts to nearly 89,000 euros. These figures illustrate the enormous leverage that consistent extra repayments have on total financing costs.

When Extra Repayments Are Especially Worthwhile

The savings effect of extra repayments is greatest when the interest rate is high and when the payment is made early in the loan term. In the initial years, the interest portion of the monthly payment is at its highest, so an extra repayment has the greatest impact. Additionally, extra repayments are particularly valuable when the remaining loan term is long, because the compound interest effect has more time to accumulate.

There are, however, situations where extra repayments may be less advantageous. If you can invest the money elsewhere at a return higher than your mortgage interest rate, the investment may be economically superior. At a mortgage rate of 3.5 percent, the alternative investment would need to yield more than 3.5 percent after tax, which is rarely achievable with low-risk investments. In practice, for most homeowners, the extra repayment is the better choice.

Strategic Tips for Extra Repayments

Plan extra repayments as a fixed part of your annual budget, funded for example from Christmas bonuses, tax refunds, or performance bonuses. When signing your mortgage, negotiate the highest possible extra repayment option, even if you are not certain you will fully utilize it every year. The flexibility is valuable and typically costs only a minimal interest rate premium. Also check whether your bank offers a free repayment rate adjustment during the fixed-rate period, so you can adapt the regular repayment amount if your income situation changes.