How can I increase what I can borrow?

If you are worried that your savings may not cover all of the purchasing costs when buying a property, you can explore several options to increase your borrowing ability. Here are five options to increase what you can afford:

  1. Borrowing money from family or friends

    The first and most traditional method is to borrow money from your parents or other family. While interest rates are low and purchasing maybe attractive, the purchase fees are very high in Germany. Therefore you want to buy the right size house and not move soon after you have children. So sometimes it may make sense to borrow additionally from your parents to help you buy the right size house.

  2. Using a credit loan to cover the purchase fees

    If you have recently started a well-paying job but your savings are low due to years of studying for example, you may be eligible for a credit loan to cover the purchase fees. This will sizeably increase the risk of your application and should only be considered if you have a high disposable income with a great future outlook.

  3. Negotiating the real-estate commission or buying commission-free property

    The third most common way is to find a commission-free property, such as a newly built property, this will increase your maximum loan in some cases by as much as 50% or more.

  4. Investing your time as sweat equity

    Fourthly, you may be able to invest your own time into the property and invoice it later. This is considered as sweat equity but must be legitimate as you will need to provide the necessary invoices to the lender down the road.

  5. Closing a savings contract or “bausparvertrag”

    Fifth, the last traditional method is to wait and save - you can do so by opening a savings account or ‘Bausparvertrag’ and systematically depositing monthly payments there which will guarantee a future loan amount at a specific interest rate. When house prices increase rapidly, this may not work well for you. These products have high closing costs so they may not make sense for you.

  6. Building your own house

    Finally, a common approach used by many Germans is to build their own house. This has many benefits like being able to invest your own sweat equity, but most importantly, the purchase fees are paid only on the plot of land.

Example

You want to buy a plot of land in Berlin for 200.000 €, the estimate for construction is 200.000 €. The total cost of the property would be ( 200.000 € * 1,08 % ) + ( 200.000 € ) = 416.000 €. When compared to an existing building, you do not have to pay the property transfer tax nor the notary or the real estate commission on the building materials.

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