Buy a flat in Berlin - Germany

Advices on getting a loan to buy a flat

Hello everyone,

I know there might be other forums with similar topics but I would really apreciate some help regarding my personal "case". I am considering buying a flat in Berlin in 6 months or so and I have some questions.

I have been living 3 years in Berlin and have now an "open-end contract" and a decent salary (2300€ brutto/1500€ netto). I don't have anything else. Nobody to help, nothing as a deposit or anything.

- If I wanna buy a small flat (1 or 2 Zimmer) in Neukölln, how much do I need to invest minimum? I reckon about 35 000 EUR.

- Is there a way to now what the extra costs are gonna be? (hausgeld, insurance, interests, steuer, etc...)

- Do you think I can get a loan for almost the whole price? I guess I could spare about 4 000 EUR by then. I'm at the Sparkasse, should I just ask for appointments to all the banks and check what they can offer me? Is there a way to check if it's kinda intersting? (% interest, etc...)

- Would I manage paying back before I die if I can to pay 500€ a month?

- I still don't wanna get stuck because of the flat. If I happened to leave Berlin for a while, would that be any problem? Could I get by paying back the loan by renting the flat to somebody? Do agencies offer that (take care of everything and make sure the money comes in for the loan)?

My German is pretty good (B2/C1) but I am kinda scared about everything. I'm 25 and have never done such a thing.

Thanks a lot for all the tips and advices it would be really nice!!! I'm very unsure and confused and would love having it a little clearer

Enjoy your evening/day
have now an "open-end contract" and a decent salary (2300€ brutto/1500€ netto).
I hate to be the one to break it to you, but you don't have a decent salary; you have a salary that pays the rent, but is not enough for a mortgage.

I don't have anything else. Nobody to help, nothing as a deposit or anything.
Yet you want to buy a place and you think a bank is going to be willing to lend to you?

I don't think you have any chance of getting a mortgage without either a larger downpayment and/or a higher salary (most probably both), however, you should contact Starshollow for confirmation (he is also qualified to assist with mortgages).
There are lots of (German) planning tools on bank and property websites that show you the basics of how much a mortgage would cost. The particulars of properties on property websites will tell you the monthly running cost (but not the sinking fund cost). There are plenty of threads here about costs like taxes and fees. It might be a good idea to set up a spreadsheet to gather all if this, and you can also model different options. The "will I pay it off before I die" stuff is a personal financial literacy matter, one to educate yourself on in terms of how mortgages work and finances add up. I read books on this when I was starting out.

Although 2300 a month is not big bucks, there's a whole raft of very, very cheap stuff in Berlin of course, and interest rates are low. But my guess would be it'd likely the deposit and bigger picture that are your a barrier.

Aside from advisors, ask your bank for a realistic assessment of your possibilities. I'd do that before spending time on other banks.
Hi Engelchen,

Thanks for your reply.

"you have a salary that pays the rent" Well that is actually all I'm asking for, pay a rent. If I pay 400 EUR of rent every month, why wouldn't I be able to give it to bank?

I am young and ignorant, and do not have at all the commerial/ investment spirit, but I thought it would make sense to go to a bank with an open-end contract and 10% of what I'm asking for. I thought there might be a possibility to make the flat a garranty to the bank or so. I guess I still have a lot to learn...

Hi Swimmer,

What do you mean with "bigger picture"? Any exemple of those websites/ planing tools?

Thanks guys for your patience.
Please consider that you will not only have to cover the "Nebenkosten" which you also have to cover when renting. YOu in addition will have to cover the "Hausgeld", i.e. a maintenance fee covering (and maybe reserving for) any renewing, tear and wear etc. This may be quite a lot on top. In your case, I would not start thinking about buying unless I had available 20kEUR (or 40%).
Stun Lee and win
I hate to be the one to break it to you, but you don't have a decent salary;
Oooh, get you! I think 2300 a month for a 25 year old foreigner in a city as poor as Berlin is pretty good.

I think the best thing to do would be to start saving hard with the idea of buying in cash in four or five years time, as a cash buyer things are just so much easier and quicker. Plus there is the advantage of not being stuck with a flat in a foreign city if you do decide to leave. Prices seem to start at 40000 euros for a 50 square meter flat in Neukölln, as a cash buyer that can probably be negotiated down a further ten percent or so. Save 500 euros a month and allowing for interest you could have 40000 in six and a bit years. Save 700 and get a couple of pay rises it could be less than four years.
Prices seem to start at 40000 euros for a 50 square meter flat in Neukölln, as a cash buyer that can probably be negotiated down a further ten percent or so.
That looks very attractive. Only thing is Neukoelln isnt always so attractive (depends on the Kiez).

One thing that puts me off buying though even at those prices is that you are then stuck with the neighbours and all the various cranky busy bodies in the building, many of whom have lived there for ages and have no intention of moving. If you have one or two (or more) nutcases - people leaving notes around, passive-aggressive behaviour and all that, which is quite likely, then you are more or less stuck with it. And there tend to be a lot of these kinds of people in Berlin's Altbau. I think swimmer pointed this out in an earlier post. Germany and esp. Berlin breeds cranky busy bodies.

If youre an owner occupier its harder to move apartment than it is if you are renting. More costly, more time consuming and more complicated. To me mobility and flexibility are the most important things (as well as low living costs). As a renter in Germany you have all these things.
nothing as a deposit or anything.
If you dont even have a deposit then I think most if not all Sparkassen and the like will laugh you out of the building. This isnt the UK. At the very least they will expect you to have done the Bausparvertrag saving scheme thing.
Hi, Thanks for the help.

Thanks stun lee, I don't think I earn a lot but still believe it is quite DECENT for Berlin... I thought about saving the money to buy in cash. The problem is that the prices for a flat might increase big time in the next years and I am wondering if the 10% I could negociate in 5 years will be worth it, you know what I mean? :/

Rick, I don't think that's what Swimmer is talking about. But my English sucks so I might be misunderstanding some stuff. Concerning the people, I don't think it is a problem. I have been living in Neukölln for a while and am used to all kind of people. I'm socially very adaptable and don't think that would disturb me.

"have no intention of moving"... I hope not! I am not planning on getting a cheap flat in Neukölln hoping that it becomes a cool Kiez attracting cool hipsters and pushing away people/families who have been living here for ages so it's worth much more.

But you're right about mobility and flexibility being important. It only crossed my mind it might be possible to go for both... but I still don't know.
Hi Un.known!

I've just sent you a couple of fairly detailed PMs as I've been through all the steps you are considering and have helped friends do the same. I've added my telephone number as I know this can all be very daunting.

Call if you've any questions!
Stun Lee and win
I always consider a decent wage to be if you can pay your rent and bills and then afford to go drinking four or five times a week, 2300 is a very good wage in my book for Berlin, and considerably above the mean I would guess.

You are definitely correct to be worried about inflation in the future, all of this money printing is going to cause massive inflation once the money velocity grows, but I think it unlikely for it to happen in the Berlin housing market in the next couple of years, particularly with all of the talk about the Euro crisis: not many people will be willing to buy at the moment I would guess. Certainly if you look at immobilienscout they are suggesting that prices have increased 30 percent in Neukölln in the last year but I am not so sure how true that is, there are lots of flats around for less than a 1000 euros a square metre which is reported to be the average price in 2009. They are after all, a real estate website who are trying to sell houses by scaring people that the prices are rising.

Certainly as a hedge it might be wise to go for a 50 or 60 percent mortgage, any bank would willingly lend to someone who has shown they can save a good deposit in a couple of years and can show a decent track record for employment. As others have said, without a large deposit of at least 30 percent, there is no chance of a mortgage with a German bank. I wouldn't be too angry about that though, the tight credit is what has kept prices here so low.
Oooh, get you! I think 2300 a month for a 25 year old foreigner in a city as poor as Berlin is pretty good.
That is 2,300 gross per month, not net!
Stun Lee and win
That is 2,300 gross per month, not net!
This is Berlin, not Munich!
The Interhyp website (Interhyp is a mortgage broker) has some useful information about buying property. See the links "Ratgeber" – "Baufinanzierung" and "Rechner", which lets you calculate e.g. your budget and maximum mortgage. There you see for example that at least the accompanying costs of buying, meaning about 10% of the purchase price that come on top for real estate agent provision, real estate transfer duty (4,5%) and notary commissions etc. have to be own capital. But considering your young age and possibly meager credit history, much more down-payment might be necessary, plus the interest rate will be better with more own capital. As a general rule, if you live in the flat yourself, more own capital is better, but if you rent it out, for tax reasons a lower down-payment can make sense (you can offset mortage interests).

In any case, it's advisable to be very well informed before making any decisions. There are books about "Immobilienerwerb", or maybe your bank has info brochures. But stay away from a Bausparvertrag which they might try to sell you (there's a thread about it here, too).
Given you can speak decent German, get the latest copy of Focus which has its latest German property market survey in it. It rates Berlin as just "normal prospect" for growth. It also contains a short article about the Berlin market. The German perspective does not rate Neukölln as one of the desirable / hot areas (that's apparently Pankow and another area next to PBerg but I'm afraid I've forgotten which). It also points out that - for all the hype - most of the market remains "cold" and that there is a surplus of property. Therefore, no need to feel rushed imho.

That article also points out that inflation-proofing is the main driver of the current mania for buying, helped by low interest rates.

The "big picture" I mentioned by the way was a combination of downpayment + current earnings + prospects + credit history + other factors that determine how good a "bet" you are for a lender.

I'd suggest that anyone wanting a long term future in Berlin would well advised to buy now - is that you though, given your talk of moving on? What I'd advise anyone thinking bottom end though (one room places) is whether it might not be better to wait until they have a bigger deposit and higher income.

Bear in mind it is difficult to have cake and eat it. If your worry about buying is that prices might rocket, then yes, you will then be living in a gentrified area that poorly-paid locals can't afford! The social mix will change. Can't really be one but not the other.
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