Loan to value at German banks: why the bank's valuation sits below the purchase price
It is not the purchase price that determines your terms but the value the bank credits the property with on a lasting basis. Two buyers with the same price and equity can receive different rates. The loan-to-value ratio is the number that decides which banks are even in play for this case.
How do German banks calculate the mortgage lending value, and why is it lower than the price?
The mortgage lending value is the value the bank credits the property with on a lasting basis, so it normally sits below the purchase price. For a let property the income value under the German Mortgage Lending Value Regulation (BelWertV) governs it. It decides the loan-to-value ratio and with it your interest rate.
Indicative guidance using the income approach of the German Mortgage Lending Value Regulation (BelWertV). Not a valuation within the meaning of that regulation and not a financing commitment — every bank applies its own parameters. Applied here: minimum capitalisation rate 5.5 % (§ 12 (4) BelWertV, BaFin notice, unchanged since 1 January 2024), management cost €367 per flat (ImmoWertV Annex 3, 2026 figure), maintenance 0.5 % and refurbishment risk 0.2 % of construction cost, rent loss allowance 2 % (BelWertV Annex 1) and the floor of 15 % of gross income (§ 11 (2) BelWertV).
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Lending value calculator: do banks value a let and an owner-occupied property differently?
The mortgage lending value is what the bank credits the property with on a lasting basis, and it normally sits below the purchase price. German banks value a let property differently from an owner-occupied one.
- The lending value reflects what is durably achievable, not what is paid today. The bank must stay secured even after a market downturn — a deliberate prudential principle, not a doubt about your purchase.
- Why does it set my rate? The lending value drives the loan-to-value ratio, and banks price in tiers: drop below a threshold and you move into a cheaper rate class. That is why two buyers at the same price can get different rates.
- Same valuation abroad — a wider loan-to-value range of 60–100 %: The valuation of the property is the same — it is in Germany. What differs is the loan-to-value banks accept for non-residents: it spreads more widely and depends more on income — 60–100 %, depending on income type and creditworthiness. Which German banks finance non-residents?.
What is the mortgage lending value — and why is it lower than the purchase price? The mortgage lending value is the value the bank credits the property with on a lasting basis — not the price you pay today. It deliberately screens out whatever is currently overheated in the market, and therefore normally sits below the purchase price.
This is not distrust of your purchase but a legally intended prudence principle: the bank must know the loan is still secured if the market turns. In practice this value decides everything that follows, because the loan-to-value ratio — loan measured against the mortgage lending value — determines your interest rate.
For non-residents the point matters twice over: individual lenders cap the ratio lower under their own credit policy, while the market range itself stays at 60–100 % — where you live decides which lenders take the case, not how far they will go. An early, realistic estimate is therefore worth having before the choice of bank is made.
Pick the use above and the calculator takes the route the bank takes.
What does the formula look like, step by step?
For a let property the lending value always follows the same route, set out in §§ 9 to 12 of the German Mortgage Lending Value Regulation:
- Gross income: the sustainably achievable annual net cold rent. Where the market rent is above the contractual rent, the contractual rent counts (§ 10 (1)).
- Less operating costs: management, maintenance, rent loss allowance and refurbishment risk — at least 15 % of gross income (§ 11 (2)). For let apartment buildings the realistic figure is closer to 25 to 30 %.
- Gives the net income, reduced by the interest on the land value (§ 9 (2)). Capitalised with the multiplier derived from remaining useful life and capitalisation rate (§ 12 (1)). Plus the land value gives the income value.
The lever sits in the capitalisation rate. For residential use it is at least 5.5 % — set in § 12 (4) BelWertV and published by BaFin, unchanged since 1 January 2024. Only prime properties may go 0.5 percentage points lower, and only where eight criteria are met at once.
Market prices today often correspond to a far lower rate. That gap is where the distance between purchase price and bank value comes from — not from any doubt the bank has about your property.
Why does the income value cap a let property?
For a let apartment building there is no choice. § 4 (1) BelWertV states it plainly: the income value governs the lending value and may not be exceeded. The cost approach is calculated separately, but only as a cross-check.
The exception applies solely to one- and two-family houses and flats that are unambiguously suitable for owner-occupation (§ 4 (2)). Nobody buys an apartment building to live in it — so only what it earns counts.
Since 1 January 2025 a European rule sits on top: under Article 229 CRR III there is no longer a choice between market value and lending value for capital purposes. Banks must apply a prudent value that excludes expected price increases. Two routes are recognised — the lending value under BelWertV, or the market value with a deduction. The calculator above shows both, because for the same property they can be far apart.
That is where the actual work sits: which of the two routes a property takes decides the loan amount that is possible. More on purchase price above the bank value. There is also a briefing note to take away — four pages, free.
How do you finance land without a building on it — and why is its lending value so low? Financing bare land is not the same as a mortgage — and for banks it is the less comfortable option. The reason lies in the security: undeveloped land is harder to realise than a house and produces no income.
Banks therefore usually require more equity for a land loan and grant a lower loan-to-value ratio than for a completed property. What matters most is whether it is building land with secured planning permission or merely land expected to become developable — two entirely different cases.
Bare land is the clearest case of this rule: the harder a security is to realise, the further the lending value falls below the price paid. The gap does not disappear — it turns into equity you have to bring.
How does the mortgage lending value differ from the market value?
The mortgage lending value differs from the market value in precisely this respect: the market value reflects what can be achieved today. The mortgage lending value reflects what remains achievable on a sustainable basis.
Not to be confused with the acquisition costs: what the notary and land registry cost when buying a house depends on the purchase price, not on the mortgage lending value.
You can find a concise definition of the term in the wiki entry on mortgage lending value; this page places the value in the context of your financing decision.
What does the mortgage lending value mean for tax non-residents?
For those resident abroad, many individual lenders set an internal cap on the loan-to-value ratio; the market range remains between 60 % and 100 %, depending on the type of income and credit rating. The mortgage value therefore plays a dual role: it determines your interest rate band — and it determines whether the financing in the desired amount can be secured at all.
That is why choosing a property when you are resident abroad is not simply a matter of personal taste. Properties that are difficult for a bank to value — unusual layout, poor location, uncertain letability — will further worsen your loan-to-value ratio, on top of the discount you are already facing. A property that is easy to value is worth more to you than it is to a domestic buyer.
Before making an offer, it’s worth taking a look at the property itself: Valuing a property — the seven points in the property brochure.
Keep the result — and the relevant documents too: A calculator gives you a figure. When it comes to financing decisions, having the right documents in place before your meeting with the bank is what counts. We’ll send you the checklist that suits your situation — free of charge, with no sales pitch afterwards.
Do you need the blank forms straight away? Simply request them using the form: Self-disclosure (DE/EN) · Asset and liabilities statement (DE/EN).
Open PDF directly — without a form: Mortgage Documentation — Checklist (PDF, 9 pages) (Dutch · French) · Mortgage for non-residents for tax purposes — Checklist (PDF, 9 pages) (Dutch · French) · KfW Funding Overview 2026 (PDF, 4 pages) (Dutch)
Free mortgage value calculator: let or owner-occupied: The calculator is free of charge: you select the use – let or owner-occupied – and it follows the same calculation method as the bank. The bank calculates differently for let properties than for owner-occupied ones. The result is a non-binding guide; it does not constitute a mortgage lending value assessment within the meaning of the regulation, nor does it constitute a commitment to provide financing.
Determining the mortgage lending value: How does the bank calculate it? For let properties, the calculation is based on the income approach (Ertragswertverfahren) set out in the Mortgage Lending Value Determination Regulation. Among other things, a minimum capitalisation rate (Mindestkapitalisierungszins) of 5.5 % and a rental default risk of 2 % are applied. Each bank uses its own methods for these calculations.
Why does the mortgage lending value decide your interest rate?
The metric that follows from it is the loan-to-value ratio: the loan measured against the mortgage lending value. It is the single most important factor for your rate — more important than most buyers assume.
Banks work in brackets. Fall below a given threshold and you move into a cheaper bracket; sit just above it and you pay noticeably more. That explains an observation many buyers find puzzling: two people with the same purchase price and the same equity receive different offers — because their properties were valued differently.
In practice this means it can be worth deploying somewhat more equity to drop below a threshold. And sometimes it is better to keep the money because the next bracket is out of reach anyway. That calculation belongs before the application.
Keep this result — and the right documents: A calculator gives you a number. A financing decision needs the right paperwork ready before you talk to a bank. We'll send you the checklist that matches your situation — free, no sales call attached.
Need the blank forms right now? Get them via a quick form: self-disclosure form (DE/EN) · net-worth statement (DE/EN).
Open the file directly — no form: Germany property financing checklist (PDF, 9 pages) (Nederlands · Français) · Non-resident mortgage checklist (PDF, 9 pages) (Nederlands · Français) · KfW funding overview 2026 (PDF, 4 pages) (Nederlands)
Frequently asked questions
Calculating a property’s mortgage value: What information does the bank need?
Depending on the purpose, the calculator asks for the purchase price, the desired loan amount, the year of construction, the annual net rent (excluding service charges) and the number of flats. It also requires the living area, construction costs per square metre, plot area, standard land value and level of modernisation. Each bank uses its own calculation methods.
Why is the mortgage lending value lower than the purchase price?
Because it reflects what is achievable on a lasting basis rather than what is being paid today. The bank must remain secured even after a market downturn. That is an intended prudence principle, not doubt about your purchase.
Can I influence the mortgage lending value?
Directly hardly, indirectly yes. Complete documentation, clean property data and a traceable letting situation all help. Above all the choice of property itself matters — properties that value well produce better ratios.
Why do I get a different rate from an acquaintance with the same purchase price?
Because the rate bracket is set by the loan-to-value ratio, not the purchase price. If their property was valued higher, their ratio is lower — and so is their rate.
Does a different standard apply if I live abroad?
The valuation standard for the property stays the same; the property is in Germany. What differs is the loan-to-value ratio banks accept from non-residents — it spreads more widely and depends more on income: 60–100 %, depending on income type and creditworthiness.
What is the difference between the mortgage value and the loan-to-value ratio and limit?
The mortgage value is the value that the bank considers the property to be worth on a long-term basis. The loan-to-value ratio is the percentage ratio of the loan to this value, whilst the lending limit is the maximum percentage up to which the bank will provide financing. Both refer to the mortgage value, not the purchase price.
Lending value calculation formula: how does the bank calculate for let properties?
For a let property, the calculation is based on the income capitalisation value, regulated in §§ 9 to 12 of the Beleihungswertermittlungsverordnung (German lending value ordinance). For owner-occupied properties, the bank calculates differently.
What does the calculator show when calculating the lending value of a property?
Depending on your choice of use, let or owner-occupied, the calculator follows the same route as the bank and asks for the purchase price, desired loan, year of construction, annual net rent excluding heating and number of flats. The result is an estimate; the value your bank finally applies is determined by the bank under its own rules.
What is the difference from market value and open-market value?
The market value reflects what could be achieved today. The lending value reflects what can be sustainably achieved, so it is more conservative and as a rule lower.
Have your property assessed
Before you make an offer, we tell you how a bank is likely to value the property you have in mind.
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Editorially responsible: Olga Nikushkina — owner, §34i GewO (German mortgage brokerage), adviser register D-W-132-ZUCB-95. Specialised in German property financing with an international dimension: non-residents, foreign-currency income, cross-border workers, expats. Siegfried Perini is entered in the German intermediary register under this licence as a person directly involved in brokerage and advice (§ 11a GewO), active in real estate since 1992. Not legal or tax advice.
