How to get a mortgage

This post was sponsored by LoanLink

The housing market in Frankfurt is getting really tight at the moment and renting an apartment is getting tricky. It could be the Brexit effect, or even just a lot of speculative acquisition of property because of Brexit, but affordable rental property is becoming harder to find and property prices overall are going up. So many people are considering purchasing their own place.

It makes a lot of sense if you know that you are staying in Frankfurt for the long haul. Prices are not completely unrealistic yet, even though there are signs of a bubble, and you get to invest in a mortgage rather than simply handing over thousands each year to a landlord. For a non-German speaker though entering the housing market can be daunting especially when it comes to securing a mortgage. So here are essentials facts to get you going:

How much deposit do you need?

There are no restrictions on foreigners buying a property in Frankfurt or getting a German mortgage. But the amount you can borrow is depending on your residency status:

If you live and work in Germany: up to 100% of the property value is possible. However, you will get best interest rates for 50-60% debt funding. If you live and work abroad: up to 55-60% of the property value is possible.

How much are the purchase fees in Frankfurt?

Purchase fees come on top of the property price and must be covered with your deposit. Purchase fees include real estate tax (6%) notary fees (1.5%) and the real estate agents fees (0-5.95%). For a property worth 400,000 € the purchase fees amount to 53.800 € (13.45%). There are some German mortgage calculators where you can check the total purchase price split in property price and purchase fees.

How to apply for a mortgage in Frankfurt?

Applying for a mortgage in Frankfurt or Germany is the same process like in every other country. However, German banks apply a detailed due diligence on your financial status. There are over 400 banks in Germany offering mortgages for different rates, runtimes and with different requirements to their clients. To make sure you get the best option tailored to your specific needs it makes most sense to consult a german mortgage advisor who compares most of those lenders. LoanLink is a Berlin and Frankfurt based online mortgage broker who have specialized in advising international clients. They provide all documents in English and compare 400 regional and global German lenders:

What documents are required?

You will be asked to hand in information about your personal and financial situation including:

  • A German self disclosure
  • Proof of equity
  • Proof of income (last 3 payslips)
  • 2 years balance sheets if you are self employed
  • Property information (e.g. extract of the land register)
  • Copy of your passport / Blue card / Visa
  • Latest Tax declaration
  • Documentation of rental income

LoanLink created aComplete document checklist listing all relevant documents and where to get it.

What is an annuity loan (Annuitätendarlehen)?

The annuity loan or fixed-interest loan is the most common German mortgage. The monthly rate stays constant over time. It is made up of two parts: An interest payment and principal  payment (paid off the balance). Once a year you typically have the option of an additional principle-only payment (5 up to 10 percent of the initial amount).

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