How To Buy A House in Germany [2024] - Navigate Germany

Buying a house in Germany is a great way of investment so this article explains the information related to the costs, procedure, and documentation to buy a house in germany.

Location to Buy a House in Germany

Where you buy a house in Germany depends on the living area. People usually prefer to live in big German cities but buying house in those cities is really expensive. Buying property in Germany is a lifetime investment so focus on the factors like infrastructure, transportation, schooling, grocery stores, and job opportunities before making any final decision.

Buying House by Foreigners in Germany

If you want to live and stay in Germany, you can buy your property. If you are out of Germany, you can rent your property of sell it. You can get mortgage to buy a house in Germany.

Why Should You Buy a House in Germany?

If you want to invest in German real estate, it is always a wise decision.  You can either rent a property or buy your own house which is better than renting a house in which you get a property and pay rent to the landlord who pays the mortgage, so buy your own house and pay your mortgage yourself. People might prefer to rent because they are short of funds or they are living in a house since years. Buying a house is also risky as you might have to get loan due to which less than 50% of the properties are owned by the people in Germany. Trend is changing because of the loans available at low interest rates so here are the reasons you should consider buying a house in Germany:

No Contract

You are bound by a contract in your rented property as you have no control and cannot change anything on your own. If you buy a house, you have full control and freedom to do whatever you want even if you need to make structural changes or want to keep pets of your choice.

Interest Rate

The European central bank is offering loans at reasonable interest rates between 3.7% to 4.5%. If you are planning to buy a house but are out of funds, you can avail this offer.

Stay as Long as You Want

You have no surety that how long would you stay in your rented house. This might be because of increased rental or if your landlord asks you to vacate the house. Buying a house gives you full control of living in your house as long as you want to.

Rent Free Retirement

Best age to buy a house is your 20s or 30s. If you buy a house with 20-30 years of mortgage, you will have a rent free retirement which means you do not have to worry about the mortgage amount or the rentals for your accommodation after retirement. As the pension after retirement is not much if you have an average salary, so you might not afford the rent due to inflation.

Long Term Investment

Investment is property is beneficial for longer period as compared to other investment options such as stock markets. Property value increases with time and there is no 25% capital gain tax to be paid when you sell the property after 10 years. You get the tax advantages for 10 years, if the property’s price increases and you can also get benefit from the capital gain. Most of the transaction costs are on buyer so selling property after some time is always beneficial. Rents are also increasing in big cities, so investing in property is a great option.

Considerations Before Buying a House

Source to Buy German Property

There are private sellers or Immobilienmakler (estate agents) in Germany. You can also find a property yourself through newspaper advertisements or estate agency websites and reach out to the owner or agent to proceed further. Look up for agents through IVD, a national organization. Free of an agent is 3-7% of the property’s price. Online portals are also available where you can search for the property. These portals are:

• Immobile
• Immobilienscout24
• Immowelt.de

Property Selection

This is most important factor when buying a property. There are areas with a low turnover, so do careful research before finding a suitable property. It might take almost 6 months to one year so be patient. Do not forget to check the legal eligibility requirements, heating, roofing, windows, etc. Hire an architect or surveyor (Gutachter) to inspect everything on your behalf.

Equity Required

20 – 30% of the capital equity of the property’s price is required if you are planning to buy a property. If you have higher equity value, you can get a mortgage. Equity includes the savings in your bank, fixed securities, shares, or mutual funds, life insurance value, or any other property value.

Costs and Taxes

Consider the additional costs of up to 5-16% of the property price while buying a house in Germany.

Estate Agent’s Fee (Maklerprovision)

If an agent is involved, the cost is split at 50:50 between the seller and the buyer according to the German law passed in Dec 2020. If the agent is hired by the buyer, then total fee will be paid by the buyer. The agent is responsible for notary contract after which agent fee is paid.

Notary and Registration Fee

After purchase of the property, it must go to the notary service in which a contract needs to be signed in the notary’s presence. 1.5-3% of the property’s purchase price is notary’s fee. You can select notary yourself and prefer one who speaks your language. Notary provides the services such as preparation of the contract, signing ceremony, and registering the property by entering the sale of the property in the land register.

Property Acquisition Tax (Grunderwerbsteuer)

Germany is a country of taxes, so, you have to pay property acquisition tax of 3.5 to 6.5% of the purchase price which is charged by the federal states (Bundesland).

Average Price

Property prices varies from state to state and city to city in Germany. Both cost and rentals are increased a lot during the last decades because of the increasing demand for property. Average cost per square meter was 2.75 Euros in 2020.

Reduction in Mortgage Cost

Postbank, DeutscheBank, and Commerzbank are banks in germany that offer mortgages and have mortgage advisers if you need any help. Use a free online mortgage calculator to see different offers and choose one that suits you. 20% of the property’s price is down payment that you must pay when taking a mortgage. If you pay more, you will get better mortgage options. You can also get an additional annual payment of 5–10 % of the original mortgage amount which might reduce total interest payments.

Property Assessment Cost

If you are buying an old property, you must evaluate the value of your property which might cost up to thousands of Euros. It is important as you might need additional amount for repair and maintenance which is tax-deductible against your rental income.

Mortgage Calculation

Get an insight into your Mortgage before purchasing the property which will enable you to know the price range of a property and total cost you would need to pay. You can calculate the mortgage through an online calculator like loanlink24 which compares over 400 lenders and banks to give best offers. Their services are completely free in English. 

Mortgages take around 25 to 30 years to settle and the first five years are with fxed interest rate. Variable interest rates are also available because of the less risky mortgage offers in Germany. Interest may be tax deductible but it does not benefit in terms of capital gains tax.

Step of Buying a House in Germany

Here are teh steps to follow if you are interested to buy a house in Germany;

Ready Your Finance

Understand your financial situation when planning to buy a house. Calculate the mortgage amount to know what you can have as a principle and then look up for the parties selling houses in Germany. You can use online platforms to see the options under your budget.

Property Research

Have patience when searching for a property as you need to evaluate multiple factors. Turnover is low in good areas so it is essential to understand the market. Online platforms can help as you will get notify whenever there is some new property for sale. Check newspaper regularly and ask people in your circle for the required property. You can also contact and hire an estate agent.

Mortgage Pre Approval

Loanlink24 offer pre approved mortgage to set your budget in advance which will help yu to find your required property quickly. Sellers prefer buyers with pre approved mortgages and those who secured their finances in advance.

Price Agreement

Visit the property in daylight and evaluate to get full insight. It is good if you visit the property with your friend or someone who is experienced to share his thoughts about the structure and can do the technical analysis of the property. Take pictures and do some measurements if you want to. Once you decide about the purchase. Discuss the price, terms, and conditions to make a good offer for both parties after which a notary will set up the sale contract.

Finalize Mortgage

Return to the bank with all information about the property you want to purchase. Discuss with the lenders or banks to get an official offer but do not forget to compare the options. Go for the mortgage option that best suits you.

Sign The Contract

Signing a contract is important in presence of the notary. Understand your contract completely before you sign it as they are in German. You can hire a translator or a bilingual notary for this purpose.

Purchase Registration

Property sales tax is required to pay after four weeks of the purchase. Property registration is compulsory as the property is officially transferred. Notary is responsible for property registration and the government will check for the sales related issues. If there are any issues, they must be resolved to complete the transfer and registration process.

Conclusion

Buying a house in Germany is an amazing and attractive investment but one must be very careful to go through the process. Decide your budget and calculate your mortgage to have a smooth process.