What’s the difference between buying for own use and buying to let?

In Germany, there is a clear differentiation between mortgages for own-use (Eigennutz) or buy-to-let mortgages (vermietet). If you’re looking to buy a property to rent it out, you will face different requirements than if you’re buying for own-use.

Differences between an own-use mortgage and buy-to-let mortgage in Germany:

  • Interest rates are higher on buy-to-let mortgages because banks have stricter (and more expensive) capital requirements for investment properties

  • The minimum deposit is typically higher than for buy-to-let mortgages

  • Proof of the rental income will allow this income to be included in your household budget or disposable income calculation

Note: If you buy an investment property and rent it out as a so-called landlord then you can offset your expenses resulting from generating rental income against your rent. This includes interest expenses as well as costs for maintenance and repairs.

In addition you can deduct a building depreciation allowance of 2% (and in some case higher) as cost from your income. The depreciation is calculated as percentage of the building cost of the property (in other words, the purchase price minus the value of the land).

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