Glossary: Financing & Residence Abroad
The key terms around mortgage financing, KfW, equity, credit standing and financing with residence abroad — explained neutrally. Tax assessment is for your tax adviser.
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Financing
Mortgage lending value (Beleihungswert)#
The mortgage lending value is the value a bank assigns to a property on a durable, conservative basis — it usually lies below the purchase price or market value and serves as the security benchmark for the loan.
Knowing the difference between purchase price and lending value explains why banks don’t fully finance every purchase price, and lets you plan your equity more realistically.
Book a 30-min call →Loan-to-value (LTV)#
The loan-to-value ratio (German Beleihungsauslauf, LTV) describes the relationship between the loan amount and the value of the property. The lower the LTV, the lower the risk for the bank and, as a rule, the better the terms.
The LTV explains why more equity often lowers the rate — a key lever in financing planning.
Book a 30-min call →Nominal vs. effective interest rate#
The nominal rate (Sollzins) is the pure interest on the loan amount. The effective rate (Effektivzins) additionally includes certain financing costs and makes offers easier to compare.
Distinguishing the two interest measures lets you compare offers correctly and spot hidden costs.
Fixed-rate period (Zinsbindung)#
The fixed-rate period is the time for which the agreed nominal rate is locked. After it ends, the terms are renegotiated (follow-up financing). Common periods range from short to long terms.
Choosing the right fixed-rate period is a central decision — it sets your planning certainty and interest cost over many years.
Book a 30-min call →Forward loan#
A forward loan locks in today’s interest rate for a follow-up financing that only starts in the future — in return for a premium. It suits borrowers whose current fixed-rate period is ending and who fear rising rates.
If you need a follow-up financing in the coming years, you can hedge against rising rates.
Book a 30-min call →Follow-up financing (Anschlussfinanzierung)#
Follow-up financing is the financing of the debt remaining after the fixed-rate period ends — either with the existing bank (prolongation) or by switching to another bank (rescheduling).
A follow-up financing planned in good time can save a lot of money over the remaining term.
Book a 30-min call →Full-repayment loan (Volltilger)#
A full-repayment loan is paid off in full by the end of the fixed-rate period — so no residual debt and no follow-up financing remain. In return, the instalment is higher.
Full planning certainty with no follow-up financing — attractive for anyone aiming to be debt-free by a fixed date.
Book a 30-min call →Special repayment (Sondertilgung)#
A special repayment is an additional, unscheduled repayment alongside the agreed instalment. Many contracts allow a certain share each year free of charge.
Special-repayment rights give flexibility to become debt-free faster — for example from bonuses or inheritances.
Commitment interest (Bereitstellungszins)#
Commitment interest is charged when an approved loan has not yet been (fully) drawn down — typical for new builds or refurbishments paid out by construction progress. A commitment-free period cushions this.
Anyone building or refurbishing avoids unnecessary extra costs with the right commitment-free period.
Conversion right for foreign-currency loans (§ 503 BGB)#
The conversion right under § 503 BGB lets consumers resident in an EU country outside the eurozone convert a euro-denominated property loan into their local currency under certain conditions, if the exchange rate shifts significantly to their disadvantage. It applies only to contracts from 21 March 2016 and not to residence outside the EU.
Knowing that the conversion right doesn’t apply at all outside the EU disarms many blanket bank rejections.
Early sale: prepayment penalty & speculation period#
Anyone who sells before the fixed-rate period ends and redeems the loan usually pays the bank an early-repayment penalty; ten years after full disbursement there is a statutory right of termination (§ 489 BGB). For let properties, the ten-year speculation period (§ 23 EStG) is relevant for tax.
Disarms the scare words “prepayment penalty” and “10-year lock-in” with facts instead of blanket fear.
Book a 30-min call →Mortgages for doctors — special status#
Because of low default risk and a stable income outlook, banks treat doctors as a preferred client group and often grant special terms. Specialist institutions such as apoBank serve medical professions but are not automatically the cheapest choice.
An independent market comparison instead of a single house offer makes full use of doctors’ special status.
Book a 30-min call →Practice loan vs. private mortgage#
Practice financing (establishment, equipment, panel-doctor seat) and private property financing are separate matters. It is often sensible to run both with different banks — the practice with a specialist institution, the private property via the open market comparison.
Clear roles, no mixing — each financing runs where the terms are best.
Book a 30-min call →How much house can I afford?#
The affordable financing follows from a household calculation: regular income less living costs, fixed outgoings and a safety buffer. From that comes the sustainable monthly instalment and — with equity and interest rate — the possible purchase price.
Avoids overestimation and rejections — you search deliberately within a feasible range.
Book a 30-min call →Initial repayment rate (Tilgungssatz)#
The initial repayment rate sets what share of the loan amount is repaid each year. It determines the term and the total interest cost and rises over the years in an annuity loan, because the interest share falls.
A well-chosen repayment rate shortens the term and saves interest without overstraining the instalment.
Book a 30-min call →Annuity loan (Annuitätendarlehen)#
The annuity loan is the standard form of mortgage financing: you pay a monthly instalment that stays constant over the fixed-rate period and is made up of interest and repayment. As the residual debt falls, the interest share decreases and the repayment share increases.
A plannable, constant instalment as the basis of any sound mortgage financing.
KfW home-ownership funding for families#
Through the KfW, the state funds owner-occupied housing: “Home Ownership for Families” (KfW 300) for climate-friendly new builds, “Young Buys Old” (KfW 308) for existing properties needing refurbishment, and the home-ownership programme (KfW 124). The family programmes require children, owner-occupation and income limits.
A tangible interest advantage for eligible families — we check entitlement and how it combines.
Book a 30-min call →Building-savings contract (Bausparvertrag)#
A building-savings contract combines a saving phase with a later entitlement to a loan whose interest rate is already fixed at signing. It serves primarily to lock in interest for a future financing, modernisation or follow-up financing — not as a pure investment.
Locking in interest for a later purchase or follow-up financing — selected to match your schedule.
Book a 30-min call →Developer financing (Bauträgerfinanzierung)#
Financing the development and construction of properties by a developer — from land purchase through the build phase to the sale of the finished units. Usually as a first-ranking secured loan via banks or debt funds.
Knowing the phases and the right lenders secures the financing even when the house bank can’t fit the project into its grid.
Book a 30-min call →Project financing#
Financing of a specific property project, where above all the viability of the project itself — costs, values, pre-sales, pre-lettings — decides the approval, not solely the developer’s credit standing.
Understanding what lenders look at in projects means preparing the documents correctly and getting an approval faster.
Book a 30-min call →Senior loan#
The first-ranking secured, largest and cheapest building block of a property financing. In the event of loss it is served before all subordinated blocks.
Setting up the senior tranche cheaply and suitably noticeably lowers the total cost of the financing.
Book a 30-min call →Whole loan#
A single-source financing that bundles senior and subordinated shares into one loan — the borrower has one contract partner instead of several.
Knowing the pros and cons of a whole loan lets you choose deliberately between simplicity and the cheapest separate structure.
Book a 30-min call →Bridge / interim financing#
A short-term loan that bridges a time gap until the final financing or the sale proceeds. It is built around a clear, demonstrable repayment route (exit).
Weighing speed against cost correctly secures opportunities that would otherwise fail on the slow bank process.
Book a 30-min call →Mezzanine capital#
A subordinated financing block between the senior loan and equity that closes the equity gap and is in part counted by banks as economic equity. As an investment product, its brokerage requires a licence (§34f GewO).
Knowing when a subordinated block makes sense enables projects for which your own equity alone isn’t enough.
Book a 30-min call →Subordinated loan (Nachrangdarlehen)#
A loan with a subordination agreement: in insolvency it is served only after all senior creditors. It counts as an investment product; its brokerage requires a licence under §34f GewO.
Understanding the difference between senior and subordinated capital reveals the costs and risks of a capital structure.
Book a 30-min call →Loan-to-cost (LTC)#
A ratio that sets the debt against the total costs of a project. The higher the ratio, the higher the risk for the lender — and the more expensive and selective the capital.
Keeping LTC and LTV apart lets you assess and compare financing offers realistically.
Book a 30-min call →Acquisition financing#
Financing the purchase of a property or plot, often time-critical. For plots without building rights it is considered riskier than a project financing.
Financing the acquisition in good time and suitably secures properties before others step in.
Book a 30-min call →Portfolio financing (Bestandsfinanzierung)#
Financing or refinancing of existing, let properties. What matters most is the sustainably achievable rental income and the property value.
Refinancing your portfolio cleverly frees up liquidity for the next purchase instead of selling substance.
Book a 30-min call →Credit standing & equity
Equity ratio#
The equity ratio is the share of total costs you cover from your own funds. It influences whether, and on what terms, a bank finances.
A realistic look at your equity makes clear what is financeable and where the interest advantage lies.
Book a 30-min call →Credit standing / SCHUFA#
SCHUFA and comparable credit agencies assess creditworthiness. Banks use this credit report to gauge payment behaviour and existing obligations.
Knowing your credit standing means going into the bank meeting prepared and avoiding nasty surprises.
Book a 30-min call →Personal financial statement (Selbstauskunft)#
The personal financial statement is the structured overview of your finances — income, expenses, assets and liabilities — that the bank needs for the credit assessment.
A clean financial statement speeds up approval and strengthens your negotiating position.
Junior doctor on a fixed-term contract#
Junior doctors often work on fixed-term contracts. Because of the shortage of doctors, banks usually rate such fixed terms far more positively than in other professions, as an extension or follow-on post is considered very likely.
Financing is possible early in the career, not only after the specialist exam.
Book a 30-min call →Doctor in private practice — proof of income#
Doctors in private practice are freelancers. Banks assess their income from tax assessments over several years, a business analysis (BWA) and an income-surplus statement rather than from payslips.
Prepared documents and knowledge of the bank logic avoid delays and rejections.
Book a 30-min call →Residence abroad
Russian-language service#
Perini Finance & Property also offers advice and support for property financing in Russian — a service for Russian-speaking clients who prefer to discuss complex financial matters in their mother tongue.
Discussing financial matters in your mother tongue builds trust and avoids misunderstandings on important decisions.
Book a 30-min call →Financing with residence abroad#
Financing a property in Germany is possible even with residence abroad, but under stricter conditions. Since the Mortgage Credit Directive (2016), banks assess credit standing more intensively; many prefer an EU residence and income in euros.
Many Germans abroad and expats hear a blanket “it won’t work” — in fact it comes down to the right bank and preparation. This is a core topic of our advice.
Book a 30-min call →Income in foreign currency#
Anyone whose income is not in euros is a difficult case for many banks. The background is the statutory conversion right for foreign-currency loans (§ 503 BGB), which lets EU consumers in non-euro countries switch the loan currency on strong exchange-rate moves — a risk many banks avoid.
Expats paid in francs, dollars or pounds often meet rejection — we know the institutions that go along with it.
Book a 30-min call →Equity / LTV with residence abroad#
For borrowers resident abroad, banks usually require more equity or accept a lower loan-to-value (LTV) than for residents — to offset the higher risk and harder access to collateral.
Realistic expectations on equity save frustration — and show early what is actually feasible.
Book a 30-min call →Interest rates with residence abroad#
Financings for borrowers resident abroad are more effort and higher risk for banks; this can show up in somewhat higher rates or stricter conditions.
Knowing the mechanics, you can counter with good preparation and bank selection.
Book a 30-min call →German settlement account#
Many banks expect interest and repayment to be collected from a German or SEPA-capable account. For borrowers abroad, a German settlement account can therefore be part of the requirements.
Clarifies early a formal hurdle on which financings otherwise get stuck.
Identification / signature from abroad#
Banks must identify borrowers in a legally secure way (Legitimation). From abroad this is done, depending on the bank, by video ident, via consulates/notaries or at an appointment in Germany; the notary appointment for the purchase usually requires personal or authorised attendance.
Removes the worry of having to travel to Germany for every step.
Book a 30-min call →Which banks finance residence abroad?#
Not every bank finances borrowers resident abroad. Which institutions go along depends on the country of residence, the income currency and the property, and changes over time. A market overview is decisive here.
The market overview saves rejections and protects your credit standing from too many unsuccessful enquiries.
Book a 30-min call →Returnee plan: buy now, move back later#
Many Germans abroad want to buy in Germany today and let the property at first, in order to move in themselves later. This is financeable in principle; what matters is the planned use, the time horizon and the later owner-occupation.
Speaks directly to a typical expat life model and positions the financing as the enabler.
Book a 30-min call →Tax
Limited vs. unlimited tax liability#
Anyone with neither a residence nor a habitual abode in Germany is generally only subject to limited tax liability and taxes here only certain domestic income (§ 49 EStG) — including rental income from German properties. The precise assessment is a matter for the tax adviser.
Clears up a basic fear of many expats while drawing a clean line to tax advice.
Book a 30-min call →Rental income after moving abroad#
Rental income from a property located in Germany generally remains taxable in Germany under the situs principle — even if the owner moves abroad. The double-taxation agreement governs the relationship with the country of residence.
Removes the widespread misbelief that German tax liability ends automatically on moving away.
Book a 30-min call →Double-taxation agreement (DBA)#
A double-taxation agreement (DBA) between Germany and the country of residence sets out which state may tax which income, thereby preventing double taxation — for instance by credit or exemption. For property, the situs principle usually applies.
Removes the common worry of double taxation and points to the right place (the tax adviser).
Book a 30-min call →Basic tax-free allowance under limited tax liability#
Taxpayers with limited liability are generally not entitled to the basic tax-free allowance (§ 50 EStG); domestic income such as rents therefore tends to be captured from the first euro. Under certain conditions, unlimited tax liability can be elected on application (§ 1 (3) EStG).
An important practical point that is often overlooked in expats’ financial planning.
Book a 30-min call →183-day rule#
The 183-day rule is a threshold common in double-taxation agreements: anyone staying no longer than 183 days a year in a state (and meeting further conditions) is generally not tax-resident there for their employment income. For German unlimited tax liability, residence and habitual abode matter above all.
Puts an often-misunderstood term in context without crossing into tax advice.
Book a 30-min call →Process & procedure
Purchase incidental costs#
Incidental purchase costs are the costs on top of the purchase price: real-estate transfer tax (varies by federal state), notary and land register, and possibly the agent’s commission. They are usually covered from equity.
Planning the incidental costs from the start means knowing the real capital requirement and avoiding financing gaps.
Book a 30-min call →How financing proceeds#
The typical course of a financing: clarify needs and budget, assemble documents, compare banks/terms, apply and have it assessed, approval, notary appointment and disbursement.
A clear roadmap takes the uncertainty out of one of the biggest financial steps in life.
Book a 30-min call →Documents required#
For the financing the bank needs documents on the person, income and property — such as ID, proof of income, proof of equity and property documents (brochure, floor plan, land register).
Complete documents shorten processing and lead to approval faster.
Book a 30-min call →Initial call (30 min)#
The initial call is a non-binding getting-to-know-you and orientation conversation (around 30 minutes) in which the project, the framework and the next steps are clarified.
A short, non-binding conversation gives orientation before you invest time and documents.
Book a 30-min call →Common concerns
Myth: no property purchase without a German passport#
There is no restriction in Germany tying a property purchase to German citizenship. Even without a German passport you can acquire and finance property — the bank assesses credit standing and collateral, not the passport.
Buyers without German citizenship are often needlessly unsettled — the clarification removes a real mental hurdle.
Book a 30-min call →Myth: deregistering ends tax liability#
Deregistering at the residents’ office alone does not end German tax liability. What matters is whether there really is no longer a residence or habitual abode in Germany — and domestic income (e.g. rent) remains taxable anyway.
Corrects a risky misassumption that circulates frequently in forums.
Book a 30-min call →Myth: there are no tax advantages on property in Germany#
The statement holds at most for the owner-occupied property (your own home). For a let property (investment), by contrast, income-related expenses and depreciation (AfA) are in principle tax-deductible — that clearly distinguishes owner-occupation from letting.
Cleanly separates own home and investment and opens the door to the investment topic (cross-reference to AUP).
Book a 30-min call →