The most popular form of mortgage in Germany is the repayment mortgage. A consistent monthly instalment is paid to the bank over the entire term of the loan.

The instalment is made up of an interest component and a repayment component: With each instalment paid, the interest portion decreases and the repayment portion increases, so that the residual debt decreases faster and faster and over time.

The fixed interest rate indicates the period for which the interest rate on your mortgage loan is fixed. Typical terms are between 5 and 30 years. During this time, the interest rate remains unchanged, regardless of possible fluctuations on the market. A short fixed interest rate (e.g. 5 to 10 years) makes sense if you expect interest rates to fall or you can repay your loan quickly. A long fixed interest rate (e.g. 15 to 30 years) gives you more planning security, especially if you expect interest rates to rise or you want to keep your monthly instalment constant over many years.

In addition to the purchase price and interest, there are other expenses associated with mortgages in Germany. These are the so-called ancillary purchase costs:

• Notary and land registry costs: Approx. 1.5% to 2% of the purchase price
• Property transfer tax: 3.5% to 6.5% of the purchase price, depending on the federal state
• An estate agent commission may also be payable: This varies depending on the German federal state and is usually between 3% and 7% of the purchase price.

With a repayment mortgage, the monthly instalment remains consistent over the term. It is made up of a repayment component and an interest component. In the beginning, the interest component is very high, as it is calculated on the entirety of the remaining debt. The repayment portion is low in the beginning, but increases with each payment, as the remaining debt is reduced continuously by the repayments made. This means the interest costs also decrease. The word repayment” refers to the repaying of the mortgage by gradually reducing the amount owed by making regular payments – or by making additional special payments.

The repayment instalment determines how quickly you repay your mortgage. The higher the repayment instalment is, the more you pay each month. This means your loan is repaid faster and the total cost of your mortgage is lower. We recommend a repayment instalment of at least 2% to 3%.

If your loan is not fully paid off at the end of the fixed interest period, you must take out a new mortgage agreement – either with your current bank (prolongation) or with another bank or financial institution (remortgage).