What does 100%, 90%, or 80% financing mean?

Show notes

Banks prioritize security and often use the property you're buying as collateral for loans. They assess both the property's current value and potential future value growth. Typically, they lend up to 100% of the property's purchase price.

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Remember, besides the property cost, there are additional expenses known as "incidental costs" (Kaufnebenkosten) which are about 10% of the property's price.

If you can't afford these extra costs, you might need to borrow from the bank, but this can lead to higher interest rates. Conversely, if you invest more of your own money, the bank might offer better loan terms.

Keep in mind that not every Euro you invest changes your financing conditions. Banks often improve interest rates at 5% intervals, like 95%, 90%, and so on. The best terms are usually around financing only 60% of the purchase price.

You don't need to fully fund a property purchase to become an investor. Financing around 90% can still lead to significant interest rate reductions.

In Germany, you can deduct mortgage interest for investment properties when filing your tax return. A tax advisor can provide personalized details for your situation.