5 steps to owning your own property in Germany
Dreaming of owning your own property? The process can seem daunting, but it doesn’t have to. Kerstin Brunner, a financial coach and mortgage advisor, walks us through the points you need to consider.
Many people dream of owning their own property. They want a safe and calm family life or perhaps extra income from renting an apartment or house. However, even those who dream of home ownership are not always aware of how many steps they need to take to realise this dream, and which topics they need to clarify along the way.
Rather than first falling in love with a property and then only later questioning whether you can afford it (and perhaps giving up, because the costs are too high, and feeling deprived of a dream and a better future), I encourage you to plan ahead and take a structured approach to this topic. Here are five important steps you need to take to make your dream of owning a property a reality.
1. Know your numbers
Before you even think about starting to house hunt, it’s important to get a solid understanding of your affordability: how much can you afford to spend on a property? Take your net monthly income, and subtract your regular expenses on things like bills, food, insurance, and hobbies. This will give you an idea of what you have left over to spend on monthly loan repayments.
You will need some equity for your deposit. If you don’t have much in savings, it might be worth focusing on building these up first, as the higher the amount of equity you have, the better your chances are of getting a mortgage.
With these two figures together, you can use a mortgage calculator to get an idea of how much you could afford to spend on a future property.
Then, it’s time to check out the market. You need to look at prices in the area where you want to purchase to get an idea of the kind of property you could afford. Prices depend on region, location, size and age. This research might make you realise that you need to be flexible on some aspects of your “dream house” - perhaps moving further out to a different area, or having a smaller kitchen or garden, or fewer bedrooms. This will prepare you for house hunting.
2. Understand the process
After you have browsed online listings and chosen a property you want to know more about, you will get in touch with the person responsible for the sale. This might be a real estate agent or the property owner themselves. In most cases, however, property owners work with real estate agents to assist them with the selling process. The real estate agent will visit the property together with you and your family and clarify any questions you have. If you like the property and want to make an offer, all communication on this will be handled via the estate agent.
If your offer is accepted, to purchase the property you will almost certainly need to secure a loan. Therefore you will have to make an application for a mortgage. You can either do this directly via a bank or work with a mortgage broker, who can handle this process for you. Loan offers can be difficult to secure, but working with a broker makes the process simpler.
Once you are ready with the loan and the property, the next step is to consult a notary, who will handle all legal aspects of the property sale. Bear in mind that in Germany the only official language for these kinds of proceedings is German, and so all conversations and documents are in German only.
3. Choose the right kind of loan
The loan or mortgage is an important topic in its own right. You will have many different options to consider before you land upon the right kind of loan for your personal situation. You’ll need to consider, for example, how long you want to fix the interest rate for, how much are you able (or willing) to pay each month for your loan, and whether you want to have the option to make unscheduled payments (overpay) on your mortgage.
Please keep in mind that the loan is always “attached” to the property. If you secure a mortgage for one property and then decide to purchase a different property, you’ll need to speak to your mortgage provider and let them know about the change, so that they can help you find a new suitable loan solution.
4. Prepare for additional expenses
You should also make sure that you are prepared to pay additional costs as part of the house purchase process, besides your deposit and monthly mortgage repayments. For example, real estate agents are allowed to collect their fees from both buyers and sellers. You’ll also need to pay a land transfer tax, the cost of which differs depending on which federal state you are purchasing in.
Your notary will also charge you for the land registration fee and additional fees for the work they have done on the property transfer. You might want to consult a surveyor to check the structural condition of the house before you purchase it - which comes at an additional cost - and you also need to factor in the cost of the move itself.
5. Understand what documents you need
In a complex process like purchasing a property, many documents need to be received, read and understood, including the loan offer and contract, notary documents, and documents from the land register and surveyor. As mentioned above, most of these official documents will be in German, and it’s vital that you understand them to ensure you don’t get any nasty surprises further down the road.
Paying to get these documents translated is one way of solving this language gap. You could alternatively work with an expert who is able to digest and relay this important information to you. An expert could also accompany you to notary appointments and help you with any questions that come up during the appointment or the rest of the property purchase process.
If you are looking for support before starting with a property purchase process, get in touch with Kerstin Brunner. As an experienced financial coach and mortgage advisor, she is able to guide expats through the property purchase experience to make it smoother and quicker. Visit her website, or listen to her appearance on the Germany Experience podcast to find out more about purchasing a property in Germany.