Mortgage financing in Berlin

How the annuity loan works

With an annuity loan, the payment stays the same for as long as the interest rate is fixed. What shifts is the split. At the start, most of the payment is interest, because the debt is still high. Each month the debt falls, so the interest share falls, and the repayment share grows.

The payment comes from a simple calculation: loan times interest plus initial repayment, divided by twelve. An example with a loan of €300,000, 3.8 per cent interest and 2 per cent repayment:

Example with an assumed interest rate, not an offer.

After ten years, you will therefore have repaid just under €73,000 and paid €174,000 in instalments. The rest, just over €101,000, was interest. The higher the interest rate and the loan, the larger this share.

Fixed-rate period: 5, 10 or 15 years

The fixed-rate period determines how long your interest rate applies. After that, you negotiate again, with the same bank or a different one. Every month, the Deutsche Bundesbank publishes what banks charge on average for new residential mortgage loans. The provisional figures for August 2026:

Source: Deutsche Bundesbank, MFI interest rate statistics, average of all new contracts, as of 1 October 2026. Your rate may differ.

The shorter the fixed period, the larger the remaining debt you refinance at an unknown interest rate. With €300,000, 3.8 per cent interest and 2 per cent repayment, €267,018 is still outstanding after five years, €227,146 after ten years and €178,946 after fifteen years.

One right helps with long fixed periods: under § 489 para. 1 no. 2 BGB, you can terminate a fixed-rate loan ten years after it has been paid out in full, with six months' notice and without a prepayment penalty. A fixed period of more than 15 years therefore protects you against rising interest rates and still leaves you a way out after ten years if rates are lower by then.

Repayment: 1, 2 or 3 per cent

The initial repayment decides how fast you become debt-free. A low repayment makes the payment smaller and the remaining debt larger. The same loan of €300,000 at 3.8 per cent interest:

€250 more payment per month reduces the remaining debt after ten years by just over €36,000. Anyone who can carry the higher payment on a lasting basis is much less dependent on the interest rate at the follow-on financing. Anyone who can only just carry it would do better to choose 2 per cent and agree special repayments.

Repayment also determines how long you pay in total. If the interest rate stayed at 3.8 per cent for the whole term, the loan would be paid off only after just over 41 years at 1 per cent repayment, after just over 28 years at 2 per cent and after just under 22 years at 3 per cent. Anyone who buys in their mid-thirties and repays at 1 per cent therefore pays well into retirement. The calculation is a model, because a new interest rate applies after the fixed-rate period, but the order of magnitude is right.

Nominal rate, effective rate and comparing offers

Every offer contains two interest rates. The nominal rate is the rate the bank uses to calculate your payment. The effective annual rate expresses the total cost of the loan as a percentage and therefore includes more than the interest alone (§ 16 Preisangabenverordnung (German Price Indication Ordinance)). For comparing two offers, the effective annual rate is the better figure.

But only compare what is comparable: the same loan amount, the same fixed-rate period, the same repayment. In August 2026, loans with fixed periods of up to five years were on average above those with five to ten years (4.03 against 3.81 per cent). Loans of more than ten years cost a little more at 4.04 per cent and protect you for longer. Also watch for commitment fees. The bank charges these if the money has not been drawn after a certain period, for example with a new build paid in instalments. When these charges start and how high they are is stated in the offer.

Have the offer calculated with the special repayment you actually want and with your equity. An example rate from an advertisement rarely applies exactly to your case.

After the fixed-rate period: follow-on financing

When the fixed-rate period ends, the remaining debt stays. You can extend with your bank, switch to another bank or repay part of it with equity. Ask your bank for an offer in good time before the end and compare it with others, because the remaining debt is then often still six figures.

What a different interest rate would do then can be worked out without a forecast. If €227,146 is still outstanding after ten years in the example and the interest rate rises by one percentage point, that costs around €2,271 more in the first year of the follow-on financing, so just under €190 a month. If it falls, you save the same amount. Anyone who builds this range into their household budget calculation today is prepared for both cases.

Special repayments and changing the repayment rate

During the fixed-rate period, you may not simply repay a property loan with a fixed interest rate early. The law allows it only with a legitimate interest (§ 500 para. 2 BGB), and the bank can then demand a prepayment penalty (§ 502 BGB).

That is why a right to make special repayments belongs in the contract if you expect bonus payments, an inheritance or a sale. How high it is and whether it costs money is stated in the offer. Also ask about a change of repayment rate, that is, the right to change the repayment during the term.

The example from above shows what a special repayment achieves: €300,000, 3.8 per cent interest, 2 per cent repayment. If you pay an additional €5,000 at the end of each year for ten years, the remaining debt falls from €227,146 to €167,485. The €50,000 of special repayments reduce the debt by just under €59,700, because no more interest accrues on the money repaid.

Subsidies: KfW loans with conditions

The KfW grants subsidised loans for owner-occupied housing. You do not apply for them at the KfW, but through your bank or your financing intermediary, and before you sign the purchase contract. The conditions change. We checked the KfW pages on 28 October 2026:

• KfW home ownership programme (124): up to €100,000 for buying or building a property in which you live yourself. Additional costs such as real estate transfer tax, notary and agent are also eligible.
• Jung kauft Alt (308): for families with at least one child under 18 years and a household income of at most €90,000 a year with one child, plus €10,000 for each further child. The building must have energy efficiency class F, G or H and be renovated within 4.5 years of the commitment. Loan of €140,000 to €180,000 depending on the number of children.
• Home ownership for families (300): for a new build or first purchase of an Effizienzhaus 40 without oil, gas or biomass heating, with the same income limits. Loan of €170,000 to €270,000.

A subsidised loan does not replace equity. It is an additional loan that the bank includes in its calculation.

What the bank checks about the property

The bank lends you money against security, and that security is the property. That is why it sets its own value. It can be below the purchase price, for example if the bank assesses the location or condition more cautiously than the market. The loan as a percentage of this value helps decide your interest rate.

The loan is secured by a land charge (Grundschuld) in the land register. The notary usually certifies it straight after the purchase contract. Because you are not yet the owner at that moment, the seller allows in the purchase contract that you may already charge their plot for your bank. This authority to charge the property belongs in every purchase contract that is financed. If the draft comes from the notary, check that it is included.

For a flat, the bank also looks at the owners' community: how high is the maintenance reserve, are major resolutions pending, is the service charge (Hausgeld) soundly calculated? A building with a well-filled reserve and well-kept minutes is better security for the bank than one where the next special levy is already foreseeable.

Documents for the bank

The bank checks two things: you and the property. The more complete your file is at the first meeting, the faster you get a reliable answer.

About you: ID, the latest payslips, employment contract, proof of equity (bank statements, securities account, building society savings contract), existing loans. Self-employed people also need income tax assessments and business evaluations. How many months or years the bank wants to see, it will tell you beforehand.

About the property: brochure, land register extract, cadastral map, living space calculation, floor plans, energy performance certificate and photos. For a flat, the declaration of division (Teilungserklärung), budget plan, the latest service charge statement and the minutes of the owners' meetings are added. Ask the seller or agent for these early, because obtaining the minutes sometimes takes weeks.

Before the contract, the bank must give you a European Standardised Information Sheet, which presents all costs and conditions in a uniform way (§ 491a BGB). This lets you compare offers from different banks directly.

Process: from confirmation to payout

1. Household budget calculation and budget. What you can afford is covered on the page How much property can I afford?
2. Compare offers and obtain a financing confirmation. The bank checks you and confirms a limit. This is not yet a commitment for a specific property, but it shows the seller that you can pay. With several interested parties, it often tips the balance.
3. Find a property and submit the documents. The bank values the property itself. Its value may be below the purchase price.
4. Sign the loan agreement. Only once the bank has given a binding commitment. As a consumer, you are generally entitled to a right of withdrawal (§ 495 BGB).
5. Notary appointment. Purchase contract and, usually on the same day, the land charge for the bank. How this works is explained in the guide Notary appointment and land register.
6. Payout. The bank pays the purchase price when the notary notifies that it is due. You pay real estate transfer tax and additional costs from equity.

At our firm, Maximilian Vigansky personally handles the brokering of property loans (mortgage loan intermediation under § 34i GewO, German Trade Regulation Act). He compares offers from several banks and supports you up to payout. The register details are in the Legal notice (German). If we receive money from a partner, we will tell you beforehand. If you are buying from abroad, you will find information in English under Mortgage for non-residents.

Sources

• Deutsche Bundesbank: residential mortgage loans to households, effective interest rates on new business (series BBIM1.M.DE.B.A2C.F/I/O/P.R.A.2250.EUR.N, August 2026, provisional, as of 1 October 2026)
• § 489 BGB, borrower's right of termination; § 500 BGB, early repayment; § 502 BGB, prepayment penalty
• § 491a BGB, pre-contractual information; § 495 BGB, right of withdrawal; § 505a BGB, creditworthiness assessment
• KfW: Programme 124, Programme 308, Programme 300
• BBI: Additional purchase costs in Berlin (6.0% real estate transfer tax, 1.5 to 2.0% notary and land register, 3.57% buyer's commission)
• All sources accessed on 28 October 2026.