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Cash-Out Mortgage: How to Unlock Wealth from Your Existing Property in Germany?

Whether your property is fully paid off or still under mortgage, here’s how to make the most of its value.
Dr. Chris Mulder

Dr. Chris is a former Senior Economist and Manager at the IMF and The World Bank. He is a Hypofriend Co-founder.

Updated on 4 May 2025

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Dr. Chris is a former Senior Economist and Manager at the IMF and The World Bank. He is a Hypofriend Co-founder.

Already own a home in Germany? You might be sitting on untapped wealth. With a cash-out mortgage, you can leverage the equity in your existing property to fund renovations, purchase a new home, invest in ETFs, or simply access cash for personal goals.

Key Points in Brief:

  • You can take out a cash-out mortgage on your property to unlock some of its equity. This gives you access to funds for other purposes—often at a relatively low interest rate.
  • You can also use your current home as collateral for purchasing a new property. This lowers the interest rate on the new loan and, in some cases, makes the purchase possible in the first place.
  • We’ve outlined several technical points here, but it’s still worth consulting a mortgage advisor. The right solution will depend on the specific mortgage market conditions at the time you’re ready.
  • Two Ways to Use Your Home Equity

    1. Take Out a Cash-Out Loan

    A cash-out mortgage allows you to tap into the free equity of your property—that’s the portion of your home’s value not tied to a current loan.

    You can use the cash however you like: as a down payment on a second property, for renovations, investments, to pay off high-interest debt or simply for personal use. Most banks allow you to take out a second mortgage up to 80% of the property’s value.

    Example:

    Your property is worth 600,000 €, and you still owe 250,000 €.

    At 80% financing, you could borrow an additional 230.000 € in cash (80% of 600k € minus 250k €). You can use this for another home, investing, or to improve your liquidity.

    You can also wait until your current loan is up for refinancing. At that point, you could refinance the full loan amount and take out extra cash—often at a better rate. However, waiting is often not worth it..

    When considering a second mortgage, it’s important to consult a mortgage advisor. Choosing the best option requires some number crunching. For example, you may want your first and second loans to end at the same time so you can refinance them together—this typically gets you a better rate.

    To limit interest rate risk, you could also pair a shorter-term second loan with a Bausparvertrag (a fixed-interest savings contract that pays off in the future). 

    Sounds complicated? Not really—but having the right advisor makes all the difference. They’ll help compare rates and guide you through the calculations.

    2. Use Your Home as Collateral for a New Property

    In this scenario, your existing property is added as collateral for the purchase of a second home. The bank secures both properties by placing land charges in both land registers. This boosts the collateral for the new loan, lowering the “internal” loan-to-value (LTV) ratio for the new loan. The main benefit is that banks face less risk and will offer a much lower interest rates. Sometimes it is even required to make the purchase possible. In addition, it can unlock:

    • Better repayment terms

    • Reduced monthly payments

    Example:
    Your home is worth 300.000 € and is fully repaid. Most banks will accept up to 80% of that value as additional collateral — 240.000 €. That 240.000 € strengthens your mortgage application for a new property, reducing the perceived risk for the bank and improving your financing terms.

    Tip: You can also use a family member’s property as collateral (e.g., parents helping children buy their first home).

    Do keep in mind that using a home as collateral can make the sale of the collateralized property harder. If that is an issue a cash-out loan can be a better solution. In any case it is useful to compare both options with an advisor.

    Calculate your mortgage options

    Use Hypofriend’s mortgage calculator to calculate your mortgage options in Germany.

     

    Before You Decide: Key Considerations

    Existing Mortgages:
    If your property already has a mortgage, some banks may hesitate to issue a second-ranked loan. The current lender is usually best positioned to offer a top-up, as they already hold the first land charge.

    Second-Rank Loans:
    If a second lender steps in, they’ll often charge a slightly higher interest rate due to added risk. Some banks allow this under strict conditions (e.g., you can’t increase the first mortgage anymore).

    Future Refinancing:
    Adding a second loan now can impact your ability to refinance later and the cost of such refinancing. Hypofriend ensures these factors are considered during your consultation. 

    Is not the best time?
    Timing can have an impact as well. The later you do the cashout the more you are likely to get, so if you plan a bigger investment, you might want to delay. If the money is already sufficient, they can go for an immediate cashout. Note that for an investment property that is in the process of being built your cash needs are often only commencing in the future. So this can be a good option as well.

    Forward Planning:
    If your current mortgage is over 5 years old, you may be eligible for a forward loan—a future-dated mortgage that locks in today’s interest rates for your refinancing. You can often combine this with a cash-out strategy. This is also a way to make a follow up refinancing easier and at lower interest rates.

    Advanced Example:
    Your home is worth 600.000 €, with 250.000 € still to repay, and your fixation ends in 3 years. You could cash out 230.000 € now and agree on a forward loan to take over the first-ranked 250.000 € in 3 years. That setup may unlock better interest rates today, because the new bank knows they’ll secure the full loan in the near future.

    Tools to Help You Get Started

    Hypofriend Equity Dashboard
    If you’re a Hypofriend customer, you can track your current mortgage balance, estimated property value, and available equity directly in your Equity Dashboard. It's the easiest way to see if you're eligible for a cash-out mortgage.

    Hypofriend Valuation Tool
    Need a reliable property value estimate? Contact an advisor for an in-depth, realistic, bank-aligned valuation of your home—crucial for understanding how much equity you can unlock. Alternatively, you can use the simple valuation calculator in your user account. 

    Expert Guidance
    Our advisors analyze your situation, compare multiple lenders, and help you avoid common pitfalls like second-rank traps, inflexible refinancing, or missed timing on forward loans.

    Calculate your mortgage options

    Use Hypofriend’s mortgage calculator to calculate your mortgage options in Germany.

    Summary

    If you own a home in Germany, you may be able to use its equity to fund new investments or personal goals, without selling.

    • Take a cash-out loan to use for anything you choose.

    • Use it as collateral to buy a second property under better terms.

    • Avoid refinancing risks by understanding second-rank loans, forward loans, and how banks assess property value.