German Mortgages Explained

What should I know if I expect to sell my house within 10 years?

In Germany, there is a clear difference between so-called buy-to-let or capital acquisitions and purchases for own-use. Your property purchase will be considered a business transaction if you have bought more than 3 properties in the last 5 years. Any gain will therefore also be taxed as income tax, as opposed to capital gains tax of 25% (§23 EStG Abs. 1).
 

  1. Buy-to-let properties can only be sold capital gains tax-free after 10 years.

  2. Residential properties that have been used solely by the purchaser can be sold within three calendar years after the purchase is signed, capital gains (and income) tax-free.

  3. In Germany, mind you, selling your property means canceling your mortgage. If your fixed period is not over it will result in cancellation fees. You can avoid these fees by either paying off the entire mortgage in line with the mortgage contract (making use of the option to pay off each year extra using the so-called Sondertilgung), renting the apartment after moving, or not fixing the interest rate for longer than the period you plan to stay. In addition, there is a special law in Germany (§ 489 BGB) that allows you to refinance your house without interest penalty after your mortgage is more than 10 years old! You can make use of this rule to pay-off your mortgage and thus avoid any interest penalties when moving house.