How does a German mortgage work?

Short answer: A typical German mortgage is an annuity loan (Annuitätendarlehen): you pay the same amount every month, made up of interest (Zinsen) and repayment (Tilgung). The interest rate (Sollzins) is fixed for a set period (Zinsbindung), often 10 years. Because interest is charged on the remaining balance, the share going to repayment grows every month while the interest share shrinks.

In short

• Three numbers define your loan: the amount (Darlehen), the interest rate (Sollzins) and the initial repayment rate (Tilgung). Together they give your monthly payment.
• The monthly payment stays constant. What changes is the split: early on mostly interest, later mostly repayment.
• The interest rate is usually fixed for 10 years, but the loan runs longer. After 10 years, most of the balance can still be outstanding. In our example, 77 %.
• What you then owe (Restschuld) has to be refinanced when the fixed rate ends. That is the biggest risk in the whole loan, see What happens when your fixed rate ends.

What is the legal basis?

A mortgage is a loan contract under § 488 BGB: the lender makes the agreed amount available, and you owe the agreed interest and have to repay the loan when it is due. The lender usually secures it with a land charge (Grundschuld) on the property, entered in the land register (Grundbuch). The statute describes a Grundschuld as a charge on a property under which a fixed sum is to be paid out of the property (§ 1191 BGB). If you stop paying, the lender can enforce that security against the property.

How is the monthly payment calculated?

The standard formula for an annuity loan is simple:

Monthly payment = loan amount × (interest rate + initial repayment rate) ÷ 12

It is the convention Hypomeister's calculator uses. Individual lenders may calculate slightly differently, for example in how they treat the month of payout, so check the schedule in your offer.

A reference case

We use one example throughout this series.

The notary and land-register amounts are planning estimates, not fixed percentages. Actual fees are calculated under the German Court and Notary Costs Act (GNotKG) and depend on the purchase transaction, financing and required registrations.

In this example the loan also finances the purchase costs. Whether a lender accepts that depends on the lender and on how much equity you contribute. The costs themselves are broken down in Hidden costs of buying.

How does the payment split over time?

In month one, interest is calculated on the full €372,000:

• Interest: €372,000 × 3 % ÷ 12 = €930
• Repayment: €1,550 − €930 = €620

Next month the balance is a little lower, so the interest is a little lower and the repayment a little higher. Over a year:

This is why a repayment schedule (Tilgungsplan) looks the way it does. How to read one line by line is covered in How to read your repayment plan.

How fast does the balance fall?

Reading the table: the loan ends after 367 months, just over 30 years, with total interest of €196,810, more than half of the amount borrowed. Halfway through the term (about year 15) you still owe more than 60 % of the loan.

Own calculation: payment fixed at €1,550, interest rate constant at 3.00 % for the whole term, no special repayments. In reality, the rate changes when the fixed period ends.

Fixed rate and loan term are not the same thing

This is the point newcomers miss most often. In the example the rate is fixed for 10 years, but the loan runs 30. After 10 years, €285,360 of the original €372,000 is still owed, about 77 %. The next 20 years will be priced at whatever rate is on offer then.

At the same payment of €1,550, a follow-up rate of 3 % means about 20.6 more years. At 5 % it means about 29.2, and at 6 % about 42.3. The full table is in What happens when your fixed rate ends.

A higher initial repayment lowers that exposure. Every extra percentage point of repayment reduces what is still owed when the fixed rate ends, at the cost of a higher monthly payment.

Which numbers should you compare?

• Sollzins: the nominal interest rate on the outstanding balance (§ 489 Abs. 5 BGB).
• Effektivzins: the annual percentage rate (effektiver Jahreszins), which also includes certain costs and is defined in § 16 PAngV. It is the figure meant for comparing offers.
• Repayment rate (Tilgung): it changes how fast you repay, not what the loan costs per percent of interest.
• Fixed period (Zinsbindung): longer periods give more certainty and usually a higher rate.

How the two rates differ is covered in Sollzins vs. Effektivzins.

All calculations are for information only and are not financial advice. Terms vary between lenders. Check your own loan contract.

The information in this article is for general information only and is not financial advice. Interest rates and terms depend on your personal situation and change over time. For a personalised offer or interest rate, speak to your bank or your financial adviser.

See your own loan in Hypomeister

Everything in this article, the monthly split, the balance over time and the Restschuld at the end of the fixed period, is what Hypomeister shows you for your own loan. Add it once and see your dashboard and repayment progress.

→ Open Hypomeister · Glossary: Annuität, Sollzins, Tilgung, Restschuld

Sources

• § 488 BGB, § 489 BGB, § 1191 BGB, § 11 GrEStG, § 16 PAngV, all checked against the statute text 2026-11-07
• Notary and land-register fees: GNotKG (link checked 2026-11-08; the 1.5 % and 0.5 % figures are planning estimates, not taken from the statute)
• Own calculations: payment, split, balance table and terms (recomputed 2026-11-07)
• Cover image: AI-generated