KFW 300: Great Subsidy for Energy-Efficient Houses in Germany

KFW 300 for families can be very attractive

Unfortunately, KFW 300 is rarely available for apartments as the energy efficiency requirements are rather high. Apartments that are being built are already quite efficient, usually meeting the standard of 55. For KFW 300, they would have to meet the standard of 40, meaning they use only 40 % of the energy of a reference apartment. Builders of apartments have to be sure that there is enough demand to sell all the apartments, and since the subsidies are targeted at a subset of people, while generous, they may not be available for very long, which may be risky for the builders. So, the supply of apartments for KFW-eligible buyers is very modest. However, when you buy or build a house, the KFW 300 program may work for you, as it only requires you or maybe one other family (for a double house) to make the decision.

The KFW 300 program is targeted at families that will occupy the property themselves (for at least 50 % of the space). You can be by yourself, but you do need to have at least one child younger than 18 living with you.

The program is designed for households with an income below a certain limit. Your taxable household income can be a maximum of 90.000 € per year with one child, plus 10.000 € for each additional child. Importantly, your gross before-tax income can be substantially higher, as tax deductions such as 6.384 € in “Kinderfreibetrag” per child reduce your taxable income. Moreover, note that your past income matters: for 2024, the taxable income for 2021 and 2022 is relevant. That may help as well.

The energy standards are quite rigorous, but you can get financing for an energy consultant to help you make sure and understand how to meet the standard.

For more details on the requirements and KFW more generally, please check here.

The mortgage decisions to make if you are eligible for KFW 300

When KFW 300 is available for you, you are faced with several key decisions about the loan.

The first and foremost decision is about the Tilgung: How quickly to repay the loan. The quicker you repay the loan, the lower the interest rate. You have three choices: paying in 10, 25, or 35 years.

The second decision is the length of the Tilgungs-free period. You can choose from one to five years.

What is recommended?

Importantly, it is about more than the interest payments and potential savings. You also need to consider the impact on your affordability: how much house you could actually build or buy.

We build a little model to calculate what choices work best for you and how much you can save. We check not just the first 10 years but also after the fixed interest period is over because then you have to remortgage at a market-related interest level.

Here are our conclusions. And some of them surprised us. Which just means that you need to do the calculations.

1. Tilgung choice:
   In principle, the lowest repayment rate and the longest loan period are the most attractive. Because of the lower interest payments, you save a substantial sum of money — up to about 60.000 €. Moreover, if you invest the money, you save well, and there is a considerable benefit to delaying the repayment.
   
   The big difference for most people, though, comes from the affordability. Repaying your loan faster reduces the income available to pay your main loan. Switching from a 35 repayment period to 25 years reduces your affordability by about 50.000 €.
   
   In this regard, choosing the option of repaying your loan in 10 years makes no sense as your affordability drops to the point that you can barely afford a home beyond the KFW loan.

2. Tilgung delay:
   Delaying Tilgung saves a bit more in interest payments, but the decline in affordability is considerable and, for a few people, attractive. If you combine it with the longer maturity, then a slightly longer repayment or Tilgungs free period may be an option, especially if you invest the money saved well.

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