German Mortgages Explained

How do lenders determine my monthly mortgage payments?

In Germany, mortgages are primarily annuities, that is you pay a fixed amount. An annuity is a fixed sum of money you repay the lender each year in the form of 12 monthly payments. This annuity stays the same for as long as you have chosen the fixed interest period.

That being said, your mortgage payments are composed of a monthly interest payment and a repayment component. With interest rates low and largely given, the main driver of your monthly payments that you can affect is the repayment component (the Tilgung as discussed under paying-off your mortgage). You can choose a repayment rate that is often between 1% and 4% initially. With a Tilgung of 1% you repay after 30 years about 35% of the loan. With a Tilgung of 4% you repay the loan in about 22 years.

The interest rate is primarily determined by the length of the fixed interest rate period and competition among banks. Therefore as elsewhere, it pays to shop around for the best rate. Our special engines search thousands of mortgages each day to find you the best rate, given what are the best conditions for your profile.