Real estate financing – this is how it works

Since the interest rate turnaround, banks have raised their requirements for real estate financing. However, despite stricter guidelines, it is still possible. The prerequisite, though, is that the financing plan is carefully thought out. What should be considered?

Even though mortgage rates have settled at around 3.5 to 4 percent (as of May 2024), prospective buyers remain hesitant. Despite the continued strong desire for homeownership, few potential buyers are currently inquiring about properties with sellers and real estate agents. Property prices are still perceived as too high in many places, even though many sellers have lowered their prices.

It can now be worthwhile to disclose your financing options to sellers and real estate agents. This makes it easier for sellers to react appropriately to current market developments. However, potential buyers should ensure that their financing is coordinated with their lending institution before submitting an offer for a property.

Plan thoroughly

Early and thorough planning is essential: your equity and your monthly net household income are the most important factors determining how much your property can cost. Seek support from financing and real estate experts during the planning process. A local, reputable real estate agent can show you where to find properties that fit your budget. An independent financing expert can help you find a suitable financing solution.

Equity capital

Buying a property without equity is generally difficult. Financing experts recommend that 20 to 30 percent of the purchase price should be covered by equity. Costs for the notary, land registry, real estate agent fees, and property transfer tax are also typically paid from equity. The more equity you have available, the more likely it is that banks will grant financing. Furthermore, a higher equity stake can lead to more favorable terms and lower repayment rates. Often, family members can also contribute equity through a private loan.

Check for funding

The government supports the purchase of energy-efficient properties through various incentive programs such as subsidies, tax breaks, lower interest rates, and non-repayable grants. Applications for funding can be submitted to the KfW Development Bank, the Federal Office for Economic Affairs and Export Control (BAFA), and regional funding programs. Experts in finance, energy, and real estate can help you find suitable funding opportunities.

Are you looking for support with real estate financing? Contact us! We would be happy to advise you and can recommend independent financing experts.

Notice

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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