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.

Refinancing Your Mortgage: Remaining Debt, Rates & Forward Loans Explained | Mortgage Calculator

Refinancing: What Happens When Your Fixed Rate Expires?

When the agreed fixed-rate period of your German mortgage ends, the loan is rarely fully repaid. The remaining debt (Restschuld) must be refinanced, and this process is called Anschlussfinanzierung. Depending on the size of the remaining balance and the prevailing interest rate environment, refinancing can significantly change your monthly payment. Early planning is therefore essential.

How Large Is Your Remaining Debt?

The remaining debt at the end of the fixed-rate period depends on the original loan amount, the interest rate, the repayment rate, and any extra repayments made. On a loan of 300,000 euros at 3.5 percent interest with 2 percent initial repayment, the remaining debt after ten years is still approximately 230,000 euros. With 3 percent repayment, it drops to about 200,000 euros, and with additional annual extra repayments of 5,000 euros to roughly 180,000 euros. This remaining balance must then be refinanced at new conditions.

Option 1: Prolongation With Your Current Bank

The simplest form of refinancing is prolongation, which means extending the existing loan with your current bank at new interest rate terms. Approximately three to six months before the fixed-rate period expires, your bank will send you a prolongation offer. The advantage is that the process is uncomplicated, no new notary or land registry fees are incurred, and the settlement is quick.

The disadvantage is that prolongation offers are often not the most competitive on the market. Your current bank knows that switching involves effort and therefore does not always offer the most attractive terms. Always negotiate and present competing offers from other banks. The bank will often improve its offer in response. Never accept a prolongation offer without comparing alternatives.

Option 2: Refinancing With a Different Bank

When refinancing with a different bank (Umschuldung), you pay off the loan at your current bank and take out a new loan with another lender. The new bank either takes over the existing land charge (Grundschuld) or registers a new one. The advantage is that you frequently obtain significantly better interest rate conditions that more than compensate for the switching effort. The rate savings can be 0.2 to 0.5 percentage points, which on a remaining debt of 200,000 euros over another ten-year fixed period amounts to several thousand euros.

The costs of refinancing include the land charge transfer or new registration (approximately 200 to 600 euros in notary and land registry fees) and potentially a new property valuation. With a land charge transfer (Grundschuldabtretung), the old bank assigns its land charge to the new bank, which is simpler and cheaper than a new registration. In most cases, the interest rate savings clearly outweigh the switching costs, particularly for high remaining balances and longer fixed-rate periods.

Option 3: Forward Loans

A forward loan (Forward-Darlehen) allows you to lock in today's interest rates for a future refinancing date. The lead time (forward period) can be up to 60 months. For this rate guarantee, the bank charges a forward premium, typically 0.01 to 0.03 percentage points per month of lead time. At a lead time of 24 months, the premium thus amounts to 0.24 to 0.72 percentage points.

A forward loan makes sense if you expect interest rates to rise and want to secure current conditions. The risk is that if rates fall instead of rising, you are locked into an above-market rate and cannot easily terminate the forward loan. Some providers offer so-called non-binding forward loans that include a cancellation right for a higher premium, providing protection against unexpectedly falling rates.

Timeline: When to Take Action

Start planning your refinancing at least 12 to 18 months before your fixed-rate period expires. During this time, obtain at least three to five offers from different banks and brokers. Use independent comparison portals and consider engaging an independent financial advisor or mortgage broker who has access to numerous bank partners. Allow sufficient time to review offers and execute a potential bank switch, as refinancing typically requires four to eight weeks of lead time.

Refinancing Checklist

First, check your current remaining debt and the time left on your fixed-rate period. Then review your current financial situation: has your income changed? Can you afford a higher repayment rate or extra repayments? Use the refinancing opportunity to adapt your financing structure to your current life circumstances. You may now be able to choose a higher repayment rate to become debt-free sooner, or you could use the opportunity to expand your extra repayment options.