Releasing equity from your property in Berlin: life annuity, partial sale and alternatives

Which routes are there for releasing equity?

The term covers models that share one feature: you keep a right of residence for a period or for life and receive money in return, as a lump sum or on an ongoing basis. Legally, they differ greatly.

• Life annuity: You sell the property and receive a pension instead of the purchase price, usually with a registered right of residence or usufruct.
• Partial sale: You sell a share and pay a usage fee for it.
• Sale with rent-back or right of residence: You sell the whole property and stay on as a tenant or holder of a right of residence.
• Reverse mortgage: You keep ownership and take out a loan that is repaid only later.

What they all have in common: you trade assets for liquidity. What that means for your heirs is something to decide before any conversation with a provider.

How does a life annuity work?

With a life annuity, you sell the property in return for regular payments until the end of your life. In case of doubt, the law provides that the annuity is payable for the creditor's lifetime (§ 759 BGB (German Civil Code)). You usually secure your home with a right of residence or usufruct. How far these rights extend is covered in our article on selling with a right of residence or usufruct.

The Verbraucherzentrale (consumer advice centre) names several points you should know:

• True lifelong annuities are rare in Germany. Commercial providers mostly offer fixed-term annuities.
• The annuity is only as secure as the buyer. There is a risk of default, especially over long terms.
• The right to the annuity should be secured in first rank in the land register (Grundbuch). One way to secure recurring payments from a plot is the Reallast (a charge on the land) (§ 1105 BGB (German Civil Code)).
• If the seller dies early, the family suffers a significant loss. The property cannot be inherited.
• Notary, land register, valuation and, where applicable, an agent all cost money.

A promise of a life annuity generally needs written form (§ 761 BGB (German Civil Code)). But because you are transferring a plot, a notary is needed anyway (§ 311b para. 1 BGB). How the annuity is taxed depends on its type. Your tax adviser clarifies that in advance.

What does a partial sale mean and what does it cost?

In a partial sale, a share goes to the buyer, according to the Verbraucherzentrale Hamburg (consumer advice centre) between 10 and at most 50 per cent. You remain the sole user and pay a usage fee for the part sold. This resembles rent or loan interest, but legally it is neither.

The cost items that consumer advocates point out:

• Usage fee: If it is tied to the consumer price index, it can rise sharply in times of high inflation. The Verbraucherzentrale Hamburg warns against fees tied to the consumer price index.
• Indexation clause: The partial buyer secures at least their purchase price plus a premium. The Verbraucherzentrale Hamburg gives clauses of around 17 per cent as usual. A weak price trend is therefore borne by you alone.
• Sale of the whole property: A later sale of the entire property can incur an execution fee. The Verbraucherzentrale gives a range of 0 to 5.5 per cent of the total price.
• Right of residence: According to the Verbraucherzentrale, it is often registered only in second rank. That is considered risky if the buyer gets into difficulties.

In March 2023, the BaFin warned that a partial sale is rarely the best solution for owners, is risky and can become expensive. In 2022, the Verbraucherzentrale Hamburg advised owners against partial sales. The Verbraucherzentrale Bundesverband (federation of consumer organisations) calls for statutory regulation of the business model. We do not arrange partial sales and therefore do not name any providers.

What applies to a sale with rent-back or right of residence?

Here you sell the whole property and receive the purchase price in one go. Two set-ups are common.

Rent-back. You sign a tenancy agreement with the buyer. According to the Verbraucherzentrale's advice, it should exclude ordinary termination and termination for own use. Rent increases can be agreed as a stepped rent or tied to a price index. The new owner bears the maintenance from then on. But you lose ownership and a say in matters, and you have the obligations of a tenant.

Right of residence or usufruct. You have the right entered in the land register (Grundbuch) (§ 1093 BGB (German Civil Code) for the right of residence, § 1030 BGB for usufruct). This lowers the purchase price, because the buyer cannot use the property themselves. How much is shown in the worked example in our article on the right of residence when selling.

The Verbraucherzentrale (consumer advice centre) points to high contract and agent fees. Compare what the security ultimately costs you: price discount, rent and running costs belong together.

How does a reverse mortgage work?

You remain the owner and receive a lump sum or monthly payments. The interest is deferred. The loan is repaid after your death by selling the property. No ongoing interest or repayment instalments are due during your lifetime.

The Verbraucherzentrale (consumer advice centre) names advantages and disadvantages:

• The payments are fixed in advance.
• The heirs are not liable with their own assets if the debts exceed the sale proceeds.
• The product is considered relatively expensive, with high interest and fees. The loan-to-value ratio is comparatively low.
• The property can no longer be used as security for other loans, and maintenance remains your responsibility.
• There are hardly any providers in Germany.

Because accrued interest reduces the later proceeds, correspondingly less is left for the heirs.

When is a normal sale the better solution?

A sale at the full market price is the simplest case: you receive the whole value, have no provider as a counterparty and pay no ongoing fees or interest. You can put the money towards a smaller, step-free flat or the rent for a suitable flat. In our view, a lot speaks for it if one of these points applies:

• The property is too large or too demanding for your age. No equity release scheme then solves the real problem.
• You want to leave your heirs assets, in cash rather than in an encumbered property.
• You do not want to depend on a buyer whose ability to pay you cannot check over decades.
• You still have an outstanding debt. How an early exit works out is covered in our article on the early repayment penalty.

On the other hand, releasing equity can pay off if you absolutely want to stay in your home and do not have to consider heirs. That is a personal weighing-up, not a calculation alone. We work out the market value, the starting point of every variant, with you using the suitable valuation method. For the tax side of a sale, read about the holding period. The general process is covered in the article Selling a property in Berlin.

What should you clarify before you decide?

1. Determine the value. Have the market value determined without encumbrances, so that you can measure every offer against it. Our property valuation is a first step.
2. Compare total costs. Calculate the price discount, fees, interest and charges over 10, 20 and 30 years.
3. Check the rank in the land register. Whether the right of residence or the annuity claim stands in first rank decides your security in a dispute.
4. Involve your heirs. Talk to your family before you sign anything.
5. Get independent advice. In March 2023, the BaFin advised comparing offers, involving people you trust and turning to consumer advice centres. A notary and a tax adviser come on top of that.

If you are thinking about selling, get in touch via the contact page. We value your property and work through a normal sale alongside the alternatives with you.

Sources

• § 759 BGB (German Civil Code), duration and amount of the annuity
• § 761 BGB (German Civil Code), form of the promise of a life annuity
• § 311b BGB (German Civil Code), contracts on plots, assets and estates
• § 1105 BGB (German Civil Code), Reallast (charge on land)
• Section 1093 BGB, right of residence
• § 1030 BGB (German Civil Code), statutory content of usufruct in things
• Verbraucherzentrale (consumer advice centre), selling a property in return for annuity payments (life annuity)
• Verbraucherzentrale (consumer advice centre), sale and rent-back of your own property
• Verbraucherzentrale (consumer advice centre), the reverse mortgage
• Verbraucherzentrale Hamburg (consumer advice centre), partial sale: sole use, but high risk
• Verbraucherzentrale Hamburg (consumer advice centre), warning about the risks of a partial sale
• Verbraucherzentrale Bundesverband (federation of consumer organisations), position paper on partial sales of property (July 2025)
• beck-aktuell, report on the BaFin warning about partial sales (6 March 2023)
• Bundestag printed paper 21/907 (15/07/2025), cites the BaFin warning about partial sales