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Loan & building a house in Germany (Bavaria)
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.
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.
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.