Funding by applying for mortgage
A foreign investor who seeks to acquire real estate in Germany can easily apply for a loan or mortgage. Over 11 banking institutions are available for this purpose. In fact, this is the most convenient and efficient way to buy an apartment for investment purposes. The banking system in Germany is considered to be one of the most progressive in Europe and at the same time friendly towards foreign investors. To date, interest rates are rather low and range between 3.5% and 5%, while mortgage may be granted for a period between 5 and 30 years. That’s why many Israeli investors who purchase properties in Germany decide for a mortgage and thus can afford an investment with own capital of ILS 200,000 in average, whereas in Israel they get 1/6 of an average apartment for the same amount.
Most banks offer a loan of up to 50%-60% of the property value to foreign investors. German residents, on the other hand, can get up to 70%. In case the borrower is a foreign resident but possesses property or business in Germany, or alternatively in a country belonging to the European Union, he can obtain a loan against a mortgage on his property/business. Mortgage can be granted for periods ranging from 5 – 30 years while interest rates vary depending on the duration of the loan.
Conditions for obtaining a mortgage in Berlin
The German banks are granting loans provided certain criteria are fulfilled. Above all, it is recommended that the property will be located in a fairly good area or neighborhood, so the bank will be able to easily sell the property in case of failure to comply with the payments. It is desirable that the respective property is leased or that the applicant can at least provide a forthcoming rental agreement. Furthermore, the price of the property should not be too low, not less than EUR 50,000. Some banks require that the property price will be not less than EUR 100,000. The applicant has to submit to the bank all required documentation (in German) proving his financial situation (salaryi/income and own capital), his ownership of the property and a mortgage insurance policy. In addition, copy of his passport.
Mortgage insurance policy
Similar to the Israeli law, German law also requires a mortgage insurance policy, a life insurance in which the bank is the beneficiary. Costs range between EUR 200 – 500.
Appraisal of the property
In order to obtain a loan from a German bank an appraisal of the actual property value by a professional land assessor is required. Unlike Israel, you may hire the services of a neutral land assessor at your choice.
Applying for mortgage
First step for choosing the adequate bank is a market survey of the German banking system. It is crucial to check a number of banks/institutions and compare the terms they are offering. Next step is to make an appointment at the selected bank and submit all requested documents. The applicant has to file a request for mortgage. Waiting time for the final response may be up to 14 days. In its response the bank will provide information regarding the interest rate based on the information in the applicant’s personal file.