Should I Get A UK or German Mortgage?
The German mortgage market is fairly conservative – indeed, older British buyers will find it reminds them of the UK mortgage market 25+ years ago!
Although things are slowly becoming more flexible, UK buyers might find it preferable to raise finance in the UK – from a remortgage or other secured loan.
What’s best for you really depends on your circumstances and the type of property you are buying in Germany – if you aren’t sure of your options you should take advice from an overseas mortgage specialist.
Getting A Mortgage In Germany
One of the features of the German mortgage system is that a fairly high deposit is required in all cases. Indeed, many German buyers are now getting around this requirement by taking both a mortgage and a loan to fund the deposit!
Some lenders may also require you to show that you have previously been a reliable saver – requirements vary.
Typical German mortgage terms are based around:
- Loan of up to 70% of property’s value
- Maximum term of 30 years / until retirement age
- Fixed interest rate
- Repayment only
- Lending multiple of approximately 3x income
If You’re Employed
Expect to have to provide comprehensive proof of both your income and your outgoings when applying for a mortgage in Germany – documents such as these:
- Last 3 months’ payslips
- Last 3-6 months’ bank statements
- Last 2 years’ P60s
You will also need a copy of your passport for your mortgage application.
If You’re Self-Employed
German lenders don’t generally offer non-status (self-certification) mortgages, so you will be required to provide full proof of your and your business’ financial status:
- 1-2 years audited accounts
- Last 6-12 months’ business and personal bank statements
- Previous tax returns
You will also need a copy of your passport and may need a letter from a chartered accountant detailing your personal drawings from your business.
Rental Income
German lenders will lend to investment buyers based on potential rental income, but expect very carefully-assessed and prudent estimations.
Buyers looking for a holiday home that will be let out some of the time may find they are only eligible under residential mortgage terms (i.e. without considering rental income).