Glossary: German mortgage terms explained

The anfängliche Tilgung is the percentage of the original loan amount that is repaid in the first year.

The Annuität is the constant total payment per period on an Annuitätendarlehen, made up of interest and repayment.

An Annuitätendarlehen is a property loan with a monthly payment of interest plus repayment that stays the same throughout the fixed-rate period.

The Anschlussfinanzierung is the refinancing of the Restschuld of a property loan after the Zinsbindung ends.

The Auflassungsvormerkung is an entry in the Grundbuch that secures the buyer’s claim to the transfer of ownership before the buyer is registered as owner.

A Baufinanzierung is the financing of buying, building or converting a property, usually through a loan secured by a Grundschuld.

A Bausparvertrag is a contract with a building society (Bausparkasse) in which you first save and, once it is allocated, can draw a loan at an interest rate fixed in advance.

The Beleihungsauslauf states as a percentage what share of a property’s Beleihungswert the loan represents (loan-to-value, LTV).

The Beleihungswert is the cautiously determined, long-term achievable value of a property that a bank uses as security for its loan.

Bereitstellungszinsen are interest a bank charges for the time a committed loan has not yet been paid out, or only partly.

Bonität describes a borrower’s creditworthiness, that is, the likelihood that the loan will be repaid as agreed.

The Darlehenssumme is the amount the bank provides for a financing: the purchase price plus ancillary costs minus the equity contributed.

The Disagio (Damnum) is a discount on the payout of a loan: the bank pays out less than has to be repaid and in return grants a lower Sollzins.

The Effektivzins is the annual total cost of a loan as a percentage, which in addition to the Sollzins includes costs such as a Disagio or processing fees.

Eigenkapital is the buyer’s own funds put into a property financing, for example savings, a building-society balance or gifts.

The Finanzierungszusage is a bank’s binding commitment to grant a specific loan on the agreed terms.

A Forward-Darlehen secures the interest rate for the Anschlussfinanzierung years before the Zinsbindung ends, in return for an interest premium.

The Grundbuch is a public register at the local court that records owners, encumbrances and rights in land.

The Grunderwerbsteuer is a one-off tax on the purchase price when buying land or property; each German state sets its own rate.

A Grundschuld is a lien on a property, entered in the Grundbuch, that a bank uses to secure its loan.

The Haushaltsrechnung sets a household’s income against its ongoing expenses to determine which Monatsrate is affordable for a financing.

A Hypothek is a lien on a property that is strictly tied to a specific loan claim and expires once that claim is repaid.

The Instandhaltungsrücklage is a capital buffer for future repairs and refurbishment of a property; for flats it is built up by the owners’ association.

Kapitaldienstfähigkeit describes whether a borrower’s ongoing income is enough to pay the interest and repayment of a loan over the long term.

Kaufnebenkosten are the costs that arise on top of the purchase price when buying property: Grunderwerbsteuer, notary and land register fees and, where applicable, a broker’s commission.

A KfW-Darlehen is a low-interest subsidised loan from the state-owned KfW banking group, for example for energy-efficient building or refurbishment.

The Maklerprovision is an estate agent’s fee; when consumers buy a flat or single-family home, since December 2020 at most half of it may fall on the buyer.

The Monatsrate is the amount paid to the bank each month, which on an Annuitätendarlehen consists of interest and repayment.

Nebenkosten are the ongoing costs of a property apart from the loan payment, such as property tax, insurance, heating, water and waste collection.

The Nominalzins is the contractually agreed interest rate charged on the loan amount; for property loans it equals the Sollzins.

Notarkosten are the fees for the notarial certification of the purchase contract and the handling of the transfer of ownership.

In a Prolongation, the current bank extends the loan after the Zinsbindung expires, on newly agreed terms.

The Restschuld is the part of the loan amount that has not yet been repaid at a given point in time.

The Schufa is a private credit bureau that collects data on consumers’ payment behaviour and provides it to banks as a basis for credit checks.

Schuldenfreiheit is the point at which a property loan has been repaid in full and no Restschuld remains.

The Sollzins is the nominal annual interest rate on the outstanding balance of a loan, excluding additional costs.

Under § 489 BGB, borrowers can terminate a property loan with a fixed rate after ten years with six months’ notice. In practice this matters for a Zinsbindung of more than ten years.

A Sondertilgung is an unscheduled payment on a loan, made on top of the regular payment, that directly reduces the Restschuld.

The Tilgung is the part of a loan payment that actually reduces the debt, as opposed to interest.

A Tilgungsplan lists, for each payment on a loan, how the payment splits between interest and repayment and what the outstanding balance is afterwards.

A Tilgungssatzwechsel is the contractual option to raise or lower the repayment rate during the Zinsbindung.

An Umschuldung is the replacement of an existing loan with a new one, usually at a different bank and on better terms.

The Verkehrswert (market value) is the price that could be achieved for a property in ordinary business at the valuation date.

A Volltilgerdarlehen is a property loan whose Zinsbindung is as long as its term, so that it is fully repaid when the Zinsbindung ends.

The Vorfälligkeitsentschädigung is compensation a bank may demand when a loan is repaid early, before the Zinsbindung ends.

The Widerrufsrecht allows consumers to withdraw from a property loan contract without giving reasons within 14 days; the period only starts after proper instruction.

Wohn-Riester is the state-subsidised pension scheme under the Riester model that can be used to buy or pay off owner-occupied housing.

The Zinsänderungsrisiko is the risk that after the Zinsbindung ends, the market rate for the Anschlussfinanzierung is higher than the previous Sollzins.

The Zinsbindung is the contractually agreed period during which the Sollzins of a property loan stays unchanged.

The Zinsbindungsende is the point at which the agreed Zinsbindung of a property loan expires and the Restschuld has to be renegotiated or repaid.