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German mortgage fundamentals

How is the monthly rate calculated?

Almost all mortgages in Germany are annuity loans. This means that your monthly installment remains the same for the duration of the fixed-interest period. Your monthly rate is calculated by taking the annual interest and repayment of the loan, which are broken down into each month. The following example shows you how the rate is calculated.


Given a loan of 300.000 €, an annual repayment rate of 2,00 % and an interest rate of 2,00 %, you will be paying back 4,00 % of the loan annually or 12.000 €. That means your monthly rate is 1.000 € per month for the duration of the fixed interest period. Your monthly rate will only change at the end of the fixed interest period when you refinance and the repayment rate and interest rate might change.

As a customer, you typically have the ability to change the repayment rate at the end of the fixed interest period if you are eligible to but the interest rate is determined by the capital markets and in turn the lender.

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