Loan to value: how do German banks calculate the mortgage lending value, and why is it lower?

Lending value calculator: let or owner-occupied

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: Because it 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.

Two buyers with an identical purchase price and identical equity can receive different rates because their properties were valued differently.

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.

German banks value a let property differently from an owner-occupied one. Pick the use above and the calculator takes the route the bank takes.

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 the rule this page describes: 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.

Why does this 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.

What does this mean if you live abroad? With a residence abroad, many individual lenders cap the loan-to-value internally; the market range stays 60–100 %, depending on income type and creditworthiness. The mortgage lending value therefore decides twice over: it sets your rate bracket — and it determines whether the financing comes about in the amount you want at all.

Choosing the property is therefore not purely a matter of taste when you live abroad. Properties a bank finds hard to value — unusual layout, weak location, unclear lettability — worsen your ratio on top of the discount you already carry. A property that values well is worth more to you than to a domestic buyer.

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) · Non-resident mortgage checklist (PDF, 9 pages) · KfW funding overview 2026 (PDF, 4 pages)

Frequently asked questions