“The bank made me an offer – is it good?” I cannot say without the numbers, and even then it is your decision. But I can explain the terms in every offer.
The annuity loan
The standard German mortgage is the annuity loan: the same instalment every month, made up of interest on the outstanding balance and repayment (Tilgung). As the balance falls, the interest share shrinks and the repayment share grows.
Nominal vs. effective rate
Sollzins is the pure rate; Effektivzins adds the bank’s costs and is the mandatory comparison figure (Price Indication Ordinance, PAngV). October 2026: the Bundesbank reports 4.04 % average effective rate for new housing loans fixed over 10 years (August 2026, preliminary; January: 3.84 %); market observers quote roughly 4.0 to 4.4 % for ten-year fixation in late October, depending on the provider – by one market index the highest since 2009.
Fixed-rate period
Typically 5, 10, 15 or 20 years. Key rule: ten years after full disbursement you may terminate any loan with six months’ notice and no penalty (§ 489 (1) no. 2 BGB).
Initial repayment – the main lever
Many banks accept 1 %; the consumer advice centres recommend at least 2 %, better more. Example €300,000 at 4 %:
| Repayment | Monthly | Balance after 10 years | Total term |
|---|---|---|---|
| 1 % | €1,250 | ≈ €263,000 | ≈ 40 years |
| 2 % | €1,500 | ≈ €226,000 | ≈ 27.5 years |
| 3 % | €1,750 | ≈ €190,000 | ≈ 21 years |
Special repayments, loan-to-value, commitment interest
Sondertilgung: the right to repay extra (commonly 5–10 % a year) – have it in the contract. Beleihungsauslauf (loan-to-value): above 80–90 % banks add a rate surcharge; more equity, lower rate. Bereitstellungszinsen: after a free period (often 3–12 months) undrawn funds typically cost 0.25 % per month.
Follow-on financing and residual debt risk
When the fixation ends, the remaining balance is refinanced at that day’s rate. If rates rise from 4 % to 6 %, interest on €226,000 jumps from about €755 to €1,130 a month. A forward loan locks in today’s rate some years ahead, for a surcharge.
Early-repayment penalty
Repaying during the fixation triggers a Vorfälligkeitsentschädigung. For property loans there is no statutory percentage cap; it must be “reasonable” (§ 502 BGB) and falls away if the contract lacked proper information on term, termination or calculation. KfW programmes are mentioned by name only.
I do not broker mortgages or rate offers. Whether and what suits you is something to clarify with an adviser licensed for that purpose.
How to proceed
- Honest budget: instalment at most 40 % of net income, plus buffer.
- Several offers with identical parameters, compared by effective rate.
- Ask for the balance at the end of the fixation – and the effect of +2 percentage points.
- Get special repayment and repayment-rate changes into the contract.
- Involve a licensed adviser before signing.
General information, not legal, tax or investment advice. Sources: German Civil Code (§§ 489, 502 BGB), Price Indication Ordinance, Deutsche Bundesbank (MFI interest rate statistics, August 2026), consumer advice centres (as of 19 Nov 2025), market mortgage rate index October 2026 – as of October 2026. A line in your offer you do not understand? Get in touch.
