I would like to ask what are conditions when you want to build a house in Germany. Is it necessary to have your own savings before you ask the bank for a loan or you can ask for 100 % loan.

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    Have you already asked your bank? – Rupert Morrish Mar 19 '18 at 0:37

100 % loans are not unheard of in Germany, but they are very rare and disproportionally expensive. Usually you would be expected to have at least 20% of the purchase price in savings (plus possibly the money for closing costs), and that goes basically for all of Germany.

How much equity (? I am not sure if linguee.com translated that correctly, I mean "Eigenkapital", i.e. the part of the money you do not need from the bank) is reasonable depends on what you want to do with the house - if you are planning to rent it out less equity might make sense, since you get a few tax breaks that are not available if you want to live there yourself.

Interest paid goes rapidly up the less equity you have (as people without captal are more likely to default).

If you already own the property on which you want to build your house that counts as equity as far as the bank is concerned (although in most areas property is worth less than owners like to think).

I know the above mostly from discussions with banks and from friends and family who applied for loans; it is not easy to find really independent sources on the internet to link here, most information is put up by mortgage companies. But even companies that (in theory) would profit from you paying more interest recommend that you should have at least 20%, ideally even 50% of the purchase price in savings (that's "traditional" mortgage companies, Fintech startups have a number of less traditional offers that I personally would not touch with a ten foot pole).

Financing 100% is a lousy idea - it will make the loan disproportionately expensive. And in Germany you cannot foreclose and walk away - if you default on your loan this will force you into bankruptcy. If you are in a position where you can convince a bank that you can afford a 100% loan you are probably in a position where you should be able to find 20% of the money upfront.

  • As first hand experience I can say that this is not quite the reality here in Germany. While your rate may go up 1 or 2% it is not *disproportionately * expensive. Especially considering the current rent-explosions and the low general interest rate. Also your best change of getting an offer may be the local banks which financed local homeowners for generations, Like Sparkasse or Volksbank. – Daniel Mar 19 '18 at 16:05
  • We seem to have very different first hand experiences, so perhaps we should agree that "it depends" and the OP needs to talk to her bank. – user66257 Mar 19 '18 at 16:13
  • I think it all depends on 1. Other securities like large and stable income, Life-insurance etc. 2. Self-occupied or not, and if subsidies will apply. 3. Of course the bank, like you already said. But I cant agree it would be a lousy idea - you a much rather likely to get no loan at all than to get a really bad rate. – Daniel Mar 19 '18 at 16:20
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    We may use different math. If I pay 2% more interest because I borrow 20% more money (and I pay that interest on the 20% more money, too), then, given compound interest, that would be disproportionally bad in my book. But different strokes for different folks. – user66257 Mar 19 '18 at 16:24
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    "if you default on your loan this will force you into bankruptcy.". I'm pretty sure it doesn't. Defaulting on your loan is a result of illiquidity. The bank will first sell your house. That might be sufficient, in which case you'll still be homeless and pretty broke but not actually bankrupt. – MSalters Mar 20 '18 at 12:44

There are subsidies, mainly by the KfW for self-occupied homes. This is in the form of a 50.000€ low interest loan, which is secondary to the bank-loan and thus lowers the risk for the bank. Your Bank will request that for you, but you can find information here

When you are eligible for the KfW-Programme you usually have no Problems in getting a house 100% financed, provided you have a stable and large enough income to support the rates.

Mortgages do get more expensive, the less secure they are - and own capital is one form of a security, but remember you can also negotiate the rates!

You should be able to bear the acquisition costs on your own, though. This is currently usually about 10% (3.5% tax, 1.5% legal, 0-8% broker) - in case you build your own only the for the cost of the land.

  • Seems that the offer is restricted to "natural persons", which includes non-Germans. The offer is further restricted to German homes. (I was a bit surprised because your answer excludes EU citizens. It seems even non-EU citizens can use this offer) – MSalters Mar 20 '18 at 12:49
  • @MSalters: Thanks for the correction. I don´t know the details but you are right, seems the only condition is that you (want to) live in the property yourself. – Daniel Mar 20 '18 at 13:44
  • “Natural persons” excludes companies and other entities which aren’t individual people. – chirlu Mar 20 '18 at 21:51
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    @chirlu: As the requirement is to live in it yourself, a physical form seems kind of an prerequisite. – Daniel Mar 21 '18 at 8:27

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