Financial Striptease anyone?
Germany offers very attractive loan terms. German mortgage rates are the lowest in the European Union with rates ranging between 1 – 10%.
The average lending rate reported by the Deutsche Bundesbank is 1.5%. The average rate for non-residents is between 2.39 and 3.9%.
German mortgage lenders will regularly finance up to 50% of the value of an apartment purchase and occasionally up to 70% on an investment apartment buildings to non-residents and up to 100% for residents.
Typically the term of a loan is between 20 to 40 years. However, the term over which the interest is fixed, doesn't usually exceed 20 years. So, when deciding on the maturity of a fixed interest, you should also consider that there maybe an increase of the fixed interest at the end of the first 20 years. This will then of course affect the amount you have to repay each month.
Also, some lenders will only lend you money until you have reached the retirement age of 75, not exactly very age friendly, but lenders want to minimise their risks...
One primary difference with obtaining a loan in Germany versus for instance the UK or USA is that the mortgage underwriters tend to be very conservative. They will not only analyse the value of your selected property and/or your income stream but also your credit worthiness – oh yes, right down to your last button
(I am joking...).
But in all seriousness, be prepared to do a small financial striptease and share your personal financial data:
Some of the documentation you will need to provide your lender with are your pay slips for the last 3 months (or three years of financial audit statements if you are self-employed), up to 6 months of bank statements, P60’s for 2 years and a copy of your passport.
Furthermore, with most lenders, all debt payments including other loans and credit cards must not exceed 30% of your gross income. Financing your property purchase using a German mortgage can be well worth your time and effort. Even though many investors find the German mortgage market conservative and antiquated; the extremely low mortgage interest rates can greatly increase your yield on investment properties.
So are you ready to find out what type of mortgage you can afford?