Germany offers 110% mortgages

Take my money.

An estate agent contacted my husband to ask if we could open our flat for interested buyers. But we were renting our flat in Germany at the time. It turns out our landlady had decided to sell the flat we were living in without telling us.

We panicked, and then I did a quick google search. As tenants in a property, I found out that we have the right to buy the flat first if we can secure a mortgage.

This solved two problems:
1. We wouldn’t have to let random people into our home (there were 40 interested buyers!)
2. We wouldn’t have to move out

Of course, this gave rise to new problems… how do we get a mortgage in Germany if we just moved here and it’s been less than a year? We can’t speak German, and we don’t know the process of buying a flat. Luckily our estate agent put us in touch with an English-speaking notary, and one of our colleagues offered to translate or drive us around when we needed help. And I’m now pretty good at baking ‘thank you’ cakes.

There were also some major gains — there is a compulsory 35% discount for buying the flat because we were the tenants. The flat was going for cheap, and I couldn’t resist a bargain.

To our surprise, banks in Germany offer 100% or 110% mortgages. This means no deposit is required. However, there is a hefty tax we have to pay to the government, which is around 9% of the flat sale price. Then there is the 3.5% commission for the estate agent and another 2.5% for the notary.

We barely had enough savings to afford it (thanks, dad). We qualified for the 100% mortgage and put together around 20k for the tax, commission and notary. I was working part-time and my husband full-time, but we didn’t have a shiny residence card.

So the bank is charging us less than 2% interest on half the loan, and the other half of the loan is split into a savings and repayment account with another provider. Overall, it should take around 30 years to pay off. And we don’t pay capital gains tax if we decide to sell in 10 years. That’s the catch right there — any time before that, it’s a stinger 42%.

We have to pay 10 euros a month for life insurance too.

All of this was a small price to pay to own a one-bedroom flat in Germany — forever. That’s right. No silly 125 year leases like back in London. Opposite us is a shopping district and it’s a stone’s throw away from a train station which is being upgraded.

I can only see this as a smart investment that we were lucky to have practically fallen into our lap. They’re going to renovate the block of flats, and that will only add to the value.