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Germany: Financing the Property Purchase
Getting a Mortgage
While expats are permitted to buy property in Germany, getting a mortgage (Hypothek) can be somewhat difficult. Banks in Germany may demand higher down payments, grant a shorter term on financing the mortgage, or require more securities. If you don’t live in Germany or intend to leave again soon, the bank may not grant you a high enough loan or refuse to consider your request at all. Since there are many banks to choose from in Germany, you should definitely shop around and collect various proposals.
Be prepared to be asked for a documented history of regular monthly savings for the last six years. Depending on the price of the property, you can expect a required down payment of at least 30 percent of the purchase price. A usual term for financing the mortgage is 10 to 20 years at a fixed interest rate.
There are two things you should keep in mind, though, if you do not plan to stay in Germany for an undetermined period of time. If you decide to sell your property within 10 years after its purchase, you have to pay 15% capital gains tax (Kapitalertragssteuer) on all profits made by owning the property. You should also enquire whether you are allowed to transfer that much money out of Germany and back to your home country.
Fees and Charges
The total fees may amount to approximately 14% of the purchase price. They include the following:
- The real-estate agent’s fee (3-6% of the purchase price): The buyer usually provides the commission. Only in rare cases is it split between buyer and seller.
- The notary’s services (1-2% of the purchase price): They include a priority notice, the final entry to the land register, as well as preparing the contract.
- The property purchase tax (Grunderwerbssteuer – 3.5-5% of the purchase price): the amount of this tax varies depending on which German federal state you live in.
Under certain conditions, the purchase is subsidized by the government. Communal banks may offer favorable loans to families with children or subsidize renovations if they meet certain ecological standards. You may also get tax breaks for investments such as solar panels or an energy-efficient system. Unfortunately, these regulations change rather frequently so make sure to consult a tax advisor on these matters.
Only a few of the costs required for maintaining a house are legally mandatory, but some of them are necessary, and many more investments could be recommended. Compulsory costs include the annual property tax (about 1% of the property’s value) as well as fire insurance. The latter is the only mandatory insurance for home owners. Insurances for theft, vandalism, water or storm damages as well as damages to the building are highly recommended, though. Most insurers have combined packages that include all of the above. You will easily find an offer that suits your personal requirements.
In Germany, home owners are responsible for cleaning the sidewalk in front of their house. This includes shoveling snow in the winter. How seriously this is taken depends on where you live. In smaller Swabian towns, for instance, not sweeping the sidewalk regularly might cause some raised eyebrows. In addition to this, you need to pay fees for road-cleaning and garbage disposal. Drainage, fresh water, and especially heating and electricity can amount to a considerable sum. Seek the advice of other home owners to get a reliable estimate, as these fees vary from town to town.
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