The mortgage and home buying process in Germany, explained by an expert

Buying a house in Germany is far from easy. Luckily, this nine-step plan from Nick Mulder at Hypofriend explains how to buy a home in Germany, from starting with a mortgage calculator to getting the keys to your new home, all backed by Hypofriend's experience of helping thousands of customers find and finance their homes. 

Step 1: Check what you can afford

Affordability in Germany primarily depends on your income, equity, age and residential status. A good place to start is an affordability calculator that incorporates both published and unpublished bank rules to estimate how much you could afford when buying your own home. This figure will give you a good starting point to focus your property search.

It's recommended to also set up a meeting with a mortgage broker right at the beginning of your house-hunting journey, so you can confirm the important details (for example loans or residency) and have a good idea of what you can actually afford.  

Step 2: Meet a mortgage advisor

Not only can a mortgage advisor give you an idea of your affordability, but they can also help you find a better mortgage deal. While you can get a mortgage directly from a bank, banks typically only offer their own products (giving you less choice) and treat you as a captive customer that they can overcharge.  

An independent mortgage broker can often offer you better rates - even for loans offered by the bank you have your current account with! Make sure you choose a mortgage broker that has access to multiple platforms so that they can compare the best prices across hundreds of banks.

Step 3: Search for a property

Armed with an affordability estimate and a mortgage in principle, you can now really start house-hunting. Our advice is first to explore different neighbourhoods or towns to get a feel for how it is to live in these areas. Have brunch, and talk to prospective neighbours!

And then make your search efficient by using a consolidated search tool to identify what properties are actually on the market and at what price. Most search engines will let you narrow down by price and number of rooms, as well as must-haves such as a balcony or a garden.

Step 4: Check the property's value

Since houses are not sold very frequently in Germany, it is harder to compare the asking price to other similar properties in an area and determine whether it is fair. 

One tip is to always check the house or apartment floor plan (Grundriss) on the property listing. This is a quick way to identify how much square meterage you're getting for your money, and if the layout actually works for you. For instance, are there lots of corridors, awkwardly-placed bathrooms or kitchens? Or does the balcony face north?

Your mortgage advisor should be able to also give you a price valuation for the property you're considering. You can also request a valuation report, which can come in handy when negotiating the property price! 

Step 5: Visit the property

The above all takes place before you've even set foot in the actual property. Now it is time to obtain a finance certificate from your mortgage advisor (which proves you're in a position to finance the property purchase), and seek an appointment with the real estate agent or owner. If you have difficulty securing an appointment, your mortgage broker can help. 

If, having visited the property and you are interested in buying it, check with your mortgage advisor if the property will work for you. They can also determine what your mortgage would look like. Of course, if the property is "hot" you should check in with your mortgage advisor before visiting, so you are prepared to move fast.

Step 6: Make an offer

What happens next depends very much on whether the market is tight, whether the property is "hot", or potentially overpriced, and how keen you are. At this point, you need to know what the potential offers from banks are.

Once you are sure that you are likely to be financed at reasonable terms, you can pay the reservation fee. The fee is refundable once you purchase the property, but may not be if you decide to pull out. This is why it's so important to seek advice prior to making an offer, to ensure you'll secure funding. 

A mortgage advisor can not only give you a high degree of certainty, but also help you secure a property in a tight market by affirming to the real estate agent the solidity of your offer. Brokers also help by obtaining the documents needed to be checked for potential problems.

Step 7: Finalise your mortgage

In the end, the main cost of your house is the mortgage, and it is your biggest financial decision.

Your mortgage broker will go through the important key elements of your mortgage, providing you with calculations to show how factors like the mortgage term, fixed interest rate length and down payment affect your monthly repayment amount. Choosing the right mortgage is essential for your long-term financial health.

Based on all offers available, you can select the best mortgage, which your advisor then seeks to secure. The aim is that you end up with the lowest possible interest rate, the best-structured mortgage and your ideal property at a good price.

Step 8: Sign the purchase contract

Once your offer is accepted, either you or the seller selects a public notary to draft a purchase contract, which both parties then sign. Before you sign the contract, you need to have a mortgage approved. 

A good advisor will have a backup plan so that you will have a signed mortgage by the time you go to the notary. 

Step 9: Get your keys

The whole process from making an offer to getting the keys may take about two months or more. After signing the purchase contract, you pay the seller your down payment and authorise the bank to transfer the loan amount.

In the purchase contract, you determine when you will get the keys - normally after you pay - and thereby take possession of the property. The legal ownership may come later as it only happens after you pay the transfer taxes (Grunderwerbsteuer) and the notary instructs the land registry to put the property in your name.

Sounds complex? Don’t worry! On the Hypofriend website, you can find all the information you need for a smooth buying process, and get access to their special search, valuation tools, and a mortgage calculator.