KFW loans and conditions for 2024 and how it applies to your German mortgage

How does KFW funding work?

KFW is a state-owned development bank. It supports own-use home buyers, the building of energy-efficient housing, and the renovation of housing.

The KFW helps you by providing subsidized loans and some grants. Some of these loans can save you tens of thousands of euros.

With the low-interest loans, the German government wants to create incentives, particularly for energy-efficient housing and also for age-appropriate conversion measures.

Homebuilders and buyers can combine their mortgage from a bank with a loan from KFW that comes with favorable interest rates.

KFW has two main types of programs:

1. The first is for general own-use buying. The main advantage of is that it can reduce the interest rate on the loan you get from the bank if you combine it with such a bank loan.

2. The second is loans for energy-efficient new housing. These are targeted in some cases to all homeowners, including investors, and in some cases to families with children with low to mid-level incomes. These loans are very attractive but are limited to properties with so-called KFW 40 or KFW 55 energy efficiency ratings. So be on the lookout for such properties.

Our financing experts will be happy to explain to you in a personal consultation which programs make sense for you and how, if necessary, several subsidy programs can be combined with each other. 

KFW loans and grants for existing properties and new builds

Below, we show you the most relevant KFW subsidies for existing and new-build properties. We explain the conditions and what is subsidized. 

One technical detail: There are two different forms of KFW financing: either an annuity loan or a bullet loan. In the case of an annuity loan, you pay an equal monthly annuity (i.e., interest and repayment) after the grace period. In the case of a bullet loan, you only pay the interest during the term and the entire loan amount in one sum at the end. This end is relatively near (up to 10 years), and few people should take the option of a bullet loan as it is much riskier, while the benefits are limited.

KFW-Wohneigentumsprogramm (124)

With this loan, the KFW supports you on your way to your own and only home in Germany. The important thing here is that you live in the property yourself and do not rent it out. What you have to consider: you can move in yourself in the beginning, it does not stop you from moving out or renting in the future.

One of the main benefits is that banks can offer you better interest rates if you combine their financing with a KFW 124 loan, as they consider it a reduction in their risk. Note that you can also combine the 124 program with other KFW loans.

The conditions 

Here are the conditions in more detail for the annuity loans, which are the most common and least risky solution: 

• Interest rates are, in recent periods, usually 0,1 % — 0,2 % cheaper than bank rates for 100% financing.  

• Loan amount: up to 100.000 euros 

• Repayment-free period: 1 to 5 years

• Payout: 100 %

• The loan can be drawn down either in one sum or in installments within 12 months of commitment. If required, the commitment period can be extended to up to 36 months, although commitment interest of 0,15% per month will then be charged on the loan do not amount yet, drawn down.

• Early repayment of the entire outstanding loan amount is possible — subject to an early repayment penalty. Unscheduled repayments of part of the outstanding loan amount are not possible.

• Note: the last two bullets apply to KFW programs 297, 298, and 300 as well.

What is being supported? 

In the case of existing properties, the loan can cover the purchase price, costs for repairs, and modernization. It can cover additional purchase costs such as notary and brokerage fees if the main bank's guidelines allow for more than 100% financing.

In the case of a new build, it's the costs for the building plot, the construction such as material and labor costs, costs for the architect, the energy consultant, notary and brokerage fees, and land transfer tax as well as costs for outdoor facilities.

KFW — Climate-friendly residential properties (297, 298)

With this loan, the KFW supports you to buy or build a new climate-friendly home in Germany. The interest rates are very attractive! The loan amount depends on how climate-friendly the building is. You can use this for both investment and own-use property.

The implicit interest subsidy amounts to about 30.000 euros for a normal climate-friendly home and 45.000 euros for an especially climate-friendly one.

Note that the longer maturity loans are by far the most attractive in the current high-interest environment.

The conditions 

• Effective annual interest rate: from 1,14 % (10 years duration) to about 2,11 % (26–35 years duration). The interest rate depends on the length of the loan (up to 35 years). An additional substitution, depending on the energy efficiency level reached, is also available.

• The property must meet energy criteria KFW 40

• Fixed interest period: 10 years for KFW 297 & KFW 298

• Loan amount: up to 100.000 euros for “Klimafreundliches Wohngebäude” and up to

  150.000 Euro for “Klimafreundliches Wohngebäude – mit QNG”.

• Repayment-free period: 1 to 5 years

KFW — Climate-friendly residential properties for families (300)

For the purchase or building of your own climate-friendly family home in Germany, The interest rates are very attractive! The loan amount depends on how climate-friendly the building is.

The implicit interest subsidy amounts to about 50.000 euros for a normal climate-friendly home and 80.000 euros for an especially climate-friendly one. Unfortunately, in practice, they are rarely available for apartments.

Note that the longer maturity loans are by far the most attractive in the current high-interest environment.

The conditions 

• Effective annual interest rate: from 0,01 % to about 0,5 %. The interest rate depends on the length of the loan (4 to 35 years). 

• Fixed interest period: 10 years

• Max loan amount for „Klima­freundliches Wohn­gebäude“:

  • 1 or 2 kids: 170.000 Euro

  • 3 or 4 kids: 200.000 Euro

  • 5 kids or more: 220.000 Euro

• Max loan amount for “Klimafreundliches Wohngebäude – mit QNG”.

  • 1 or 2 kids: 220.000 Euro

  • 3 or 4 kids: 250.000 Euro

  • 5 kids or more: 270.000 Euro

• Repayment-free period: 1 to 5 years

It is required that:

• your household includes one child under 18.

• the house is your only house in Germany, and you will live in it yourself

• your taxable household income is max 90.000 Euro per year with one child plus 10.000 Euro for each additional child: Your gross non-taxable income can be substantially higher as tax deductions such as 6.384 € in “Kinderfreibetrag” per child reduce your taxable income.
  

Energy Efficiency Modernization (261)

You can use this option to buy a residential property that has recently been renovated or to upgrade an existing one. It also applies to buildings in residential areas. All the costs for the upgrades are covered, and you may get extra benefits depending on the energy efficiency achieved.

The subsidy is also available if you turn unlivable/corporate space into a living space. It supports all energy-related measures that lead to an Efficiency House level 85 or better. This also includes Baunebenkosten and Wiederherstellungskosten. If you buy a newly renovated property, the energy-efficient renovation can only be subsidized if the costs are shown separately (e.g., in the purchase contract).

Note: The program and conditions change frequently. Our advisors check which programs are available for you and which of the many repayment options is ideal.

The conditions 

• Effective annual interest rate: from 0,24% to about 1,65 %. The interest rate depends on the length of the loan (10 to 35 years).

• Fixed interest period: 10 years

• The application or notification of construction for the residential building must have been submitted at least 5 years ago on the date of the application.

• The maximum loan amount for KFW 85/70/55 is 120.000 Euro.

• Max loan amount for KFW 40 and 85/70/55 with renewable energy is 150.000 Euro

• An additional subsidy of up to 37.500 can be obtained depending on the energy efficiency achieved

• Repayment-free period: 1 to 5 years

It is required that:

• Property must at least meet energy criteria KFW 85, or new floor space must be built

• Energy efficiency must be confirmed before the application

How to apply for KFW loans?

The KFW loan is not applied for directly at KFW, but always via a so-called “on-lending bank”. Most major German commercial banks that offer mortgages cooperate with KFW. Please note: the on-lending banks can also be the public lenders in each federal state (e.g., IBSH / IBB / IFB, etc.) This means that you take out not only the main loan to finance your dream property with the financing bank but also the matching KFW loan. 

The KFW loan is normally secured via the land register, as is the main financing. In this case, however, it is not KFW that is entered as the creditor but the on-lending bank. This is because it is liable to the KFW for your solvency. The main loan is given first place in the ranking order because it normally has a higher residual debt. The KFW loan is, therefore, secured on a subordinate basis.

As for loans in the land register: the main loan, usually an annuity loan (creditor: the on-lending bank), and the KfW loan, usually also an annuity loan (creditor: also the on-lending bank) are covered by one overall entry from the main bank.

We will be happy to advise you on the topic of KFW subsidies and take care of it.

Can I cancel a KFW loan?

You can terminate your KFW loan at any time. However, the cancellation is subject to conditions, depending on how long your KFW loan has been in place. 

• Your KFW loan has been running for less than 10 years: If the duration of your loan is less than 10 years, KFW charges an early repayment penalty. The amount of the prepayment penalty is determined by the bank through which you applied for the KFW loan at the time. You then pay the outstanding remaining debt and the prepayment penalty to KFW. 

• Your KFW loan runs for longer than 10 years: You can terminate a KFW loan that runs for longer than 10 years at any time free of charge with 6 months' notice. In this case, the statutory special right of termination under Section 489 of the German Civil Code (BGB) applies. 

In times of low interest rates, it is also worthwhile to opt for a long fixed interest period for KFW loans to avoid being exposed to the risk of interest rate changes. If, contrary to expectations, interest rates fall further during the term of the loan, the special right of termination takes effect after 10 years. In the case of KFW loans that have not been existing for more than 10 years, it is worth checking the costs. If the prepayment penalty is lower than the interest savings of the new loan, it also makes sense to switch interest rates in this case.

Is unscheduled repayment possible for KFW loans?

KFW only offers unscheduled repayments on its KFW loans to a very limited extent and normally charges an early repayment fee for unscheduled repayments. The exact amount of the early repayment fee will be disclosed to you by the on-lending bank through which you will apply for the KFW loan once you have applied for it.

KFW subsidies and affordability: a good option for your German mortgage

Knowing and using the KFW subsidies can save you a lot of money. Especially when it comes to energy efficiency. This does something good for the environment and helps you reduce your additional costs, e.g., for heating.

Another benefit is that the KFW subsidies have an impact on your affordability. It depends on the KFW subsidy program. The impact of Energy efficiency modernization (261) can be classified as a medium because of the slightly lower rate for a limited loan amount. However, it is sizable for a KFW 300 due to significantly lower interest rates.

Our financing experts will be happy to help you find the right KFW subsidy. Please contact us for a free consultation!

Note: The KFW programs 297/298 were reactivated on 20. February 2024.