Here’s a clear, plain-English guide to the most important terms you’ll encounter:
1. Annuitätendarlehen
This is the standard mortgage type. You make equal monthly payments that include both interest and repayment. Over time, the interest portion decreases while the repayment portion increases.
2. Zinsbindung
This refers to how long your interest rate is fixed. Common options are 5, 10, 15, or 20 years. During this time, your monthly payment stays stable, regardless of market changes.
3. Tilgung
The part of your payment that goes toward actually reducing the loan amount. You can usually choose your starting repayment rate — 1% to 3% per year — which affects how long the loan will last.
4. Sondertilgung
An optional extra repayment outside your regular monthly payments. Most banks allow 5–10% of the loan per year to be paid back early without penalty, helping you save on interest.
5. Vorfälligkeitsentschädigung
This is a penalty fee you might have to pay if you repay your loan early, especially during the fixed interest period. It compensates the bank for lost interest income.
6. Eigenkapital
Your own capital, or down payment. This shows financial stability. The more you contribute upfront, the more favorable your mortgage conditions will be.
7. Beleihungswert
The lending value of the property. It’s the amount a bank considers safe to finance — usually a bit less than the purchase price, based on their valuation.
8. Grundschuld
A legal instrument that gives the bank the right to claim the property if you stop paying. It’s recorded in the land registry and is required for every mortgage in Germany.
9. Schufa
Your credit score in Germany. Banks use it to assess how trustworthy you are with money. Keeping it clean is crucial for approval.
10. Finanzierungsplan
A financing plan prepared by you or your advisor. It outlines your income, loan amount, interest, fees, and repayment schedule — giving the bank a full picture.
Knowing these terms helps you ask smarter questions — and feel more confident during the process.