Mortgages

Hi

Does anyone know any German Bank/Sparkasse that offers a repayment mortgage with repayments recalculated monthly?

Typically they offer these fixed-interest repayment mortgages for something like 5,8,etc years but these work out VERY expensive. I'm looking for something like you'd get in the UK, so that we can pay back capital every month and considerably reduce the repayment period and (therefore) interest costs.

Thanks for any tips.

Hi there, I don't think that you will find anything like that in the Fatherland. German Banks are the biggest Robdogs around. You will have to go for a fixed contract. 5 o 10 Years. If you want to pay back early, you will have to negotiate this with the Bank.
Early repayments are allowed once a year only, and there will be a limit to the amount that you can repay back early.

I am waiting for the european courts to liberate the german mortgage Market. For me to change Mortgage now, it would cost me 15.000€ in "Intrest loss". Plus the fact that the Bank won't let me out of the contract. ( Whatever you do - DO NOT go to the SEB Bank!!! they are complete A*******S )
England seems to be so easy, just switch your mortgage and save a packet. They will even pay the legal fees. You won't get that here ...

Stephen

Hi

Well, I heard that HBOS are on the takeover trail in Germany, so while I won't be holding my breath there is a chance that sometime in the future the market will become more flexible.
I have found a Sparkasse that will make a 60/40 split in the loan (40% variable rate/60% fixed rate) but they still don't recalculate interest monthly (or even quarterly).
Servicewüste Deutschland.

And welcome to the real world of the Fatherland ... :-)

i posted a similar thread to this a while back but no response i think! I'm also really interested in this issue.

has anyone tried to ask a UK based lender directly ? They will lend money for holiday homes in most european countries, I don't see the difference? I'm going to do a little research when I find the time but if anyone has prior-exprience?

OK, I found something (Annuitätendarlehen).

You set a fixed repayment amount per month (which contains a percentage of capital repayment to begin, eg 5%) for a number of years at a fixed interest rate. Interest is recalculated every month so the more of your capital that is repayed then the less the interest component will be. Because you pay a fixed amount, over time, you gradually pay off more and more of the capital, etc.

OK, not so bad after all, just had to do a lot of digging and phoning.

QUOTE: I am waiting for the european courts to liberate the german mortgage Market. For me to change Mortgage now, it would cost me 15.000€ in "Intrest loss". Plus the fact that the Bank won't let me out of the contract. ( Whatever you do - DO NOT go to the SEB Bank!!! they are complete A*******S )
England seems to be so easy, just switch your mortgage and save a packet. They will even pay the legal fees. You won't get that here ...

I agree that the mortgage market needs shaking up here. But on the other hand, I dont really want Germany to go down the owner-occupation path in a big way. The result will only be higher property prices and higher rents for all as in UK.

I wonder if it even makes financial sense to lumber yourself with property here in the first place? Static or falling prices, 6% or more agency fees (paid by the buyer) plus VAT. Grundsteuer, legal costs... Said to add as much as 15% to the purchase price in some cases. Plus the costs of upkeep and maintenance.

Compare all that with renting - at much lower rents than in UK, and you get much better value rental property for your money than you do in the UK. For me, thats one of the big pluses of living in Germany - lower rents than UK and not having to get on the "property ladder" in order to afford a decent rented property.

I got a mortgage with the Volksbank with an added clause that we could pay any amount back at any time. It pissed them off a bit when I paid my mortgage off after 3 months though.

Rick

I'm sure you're right if you do not plan to be here a long time (especially since you can get clobbered by the 'speculation tax', but...

The Makler fee can be negotiated away, especially these days. It is also not an issue on new builds. Makler fees are a totally f*****-up idea in Germany. You pay the Makler to sell you a property?... ja, right.

Your rent only goes up over time. Your mortgage you pay off (eventually). At the end (say 12 years or so) then you have an asset which (with a bit of time and patience) you can convert into cash. If you rented, at the end of 12 years you have no asset. It's conceivable that you could rent an equivalent property to one you would purchase and save yourself money on maintenance, but the cost difference will not amount to the value of a house after you bought it. And having rented property here, you sure can get stung in that game too.

Don't forget that your Nebenkosten also cover many of the 'add-ons' that you also have to pay as a house owner. You're also expected to maintain the rental property and you can pretty much write-off any deposit you payed when you decide to leave. Trying to get that back from the Vermieter is probably a tougher job than trying to negotiate away a Makler fee.

Of course, there are negatives to owning a house but it is still the ultimate aim of your average Michael Mustermann just as much as for John Doe. In Germany though, the entry fee is a little higher due to all the initial fees and the necessity to have a comparatively large initial deposit.

Horses for courses...

I've just asked a mate of mine in the UK who is a IFA and his response was

"Difficulty in securing the loan" - what does he mean by that??

Another thing you have to factor in with house purchase is the interest payments you pay over 20-30 years. Does that make renting more expensive, i wonder...

We had that all explained by a financial advisor (I remember now after you have mentioned it :doh: otherwise I wouldn't have had a clue what to do here, I recommend getting a good one before going for a mortgage as they can help explain all the ins and outs of German finances. (Trouble is finding a good one to start with)
He actually explained it as "The English Method" and the "German method" which was useful.

Neil

Judging from many of the posts, this seems to be quite a widespread belief, which I don't really understand. Normal "Annuitätendarlehn" are just as widely available here as in England. Perhaps it's just that the banks tend to push the fixed interest loans more - actually, at the moment there probably not a bad bet if you know you're going to be here at least until the fixed period runs out.

As far as repaying lump sums is concerned, all the mortgages I had in UK also only calculated the extra repayments once a year. That was admittedly a long time ago, so maybe things have improved in that respect.

Main reason to buy is that you plan on staying in the same place and not moving. For us buying was cheaper than renting, but then we also bought a very cheap place (70.000 for 2 zimmer).

What I find funny is that very few Germans buy houses inspite of heavy subsitdiies (at least till recent). Had a freind that rented the same house for 35 years, never occoured to him to buy, his son in law ended up buying it and renting it to him.

We took a mortgage through Kim Marcum Bausparvertag I think, the house will be paid for when I'm 74
weird thing is that our mortgage payment is split in two 267 and 75 per month???

Why separate payments, don't now

Rob (borrowed wifey's computer)

Funny thing that, the Sparkasse did the same with us when we bought our current house, no idea why either.

@ Tim Hortons Lady aka Rob (borrowed wifey's computer)

Just pure guessing here.

Is it because you are paying fornightly? And the third smaller amount is some sort of life insurance premium to cover the mortgage? But does seem expensive for insurance premium.

Paying fornightly would reduce the overall interest if it is calculated daily.

[QUOTE]QUOTE
Why separate payments, don't now

Funny thing that, the Sparkasse did the same with us when we bought our current house, no idea why either.

Did you finance via Bausparkasse/LBS?

In the UK if you default on your mortgage then the bank can "enforce their security" on your house (ie you put your house up as security/collateral for the loan that you get) relatively easily compared to countries such as France or Germany, then sell it, get the cash, and pay off the loan that you took out with them in the first place

In Germany, it is muct harder to repossess a property, there is greater uncertainty over German property prices and the state of the market (ie its not like the Uk where house turnover is pretty high). As a result of all this, if you are a bank, then you think twice about making any real estate lending in Germany - if someone defaults on their loan in Germany, then all the above mean that it is much harder for the bank to get their cash back

All the big German banks (Deutsche, Dresdner, Commerzbank) got rid of their mortgage banking loans by setting up Eurohypo cause theres so little money to be made from it

All of which leads to expensive mortgages in Germany (despite ECB interest rates being a tiny 2%)

Oh, another difference in lending in Germany - German banks tend to lend against property value, whereas in the UK banks will happily lend to you based primarily on the quality/size of your earnings

I suspect that's something that might have changed slightly following Basel II!

Not to get too techy about it, but Basel II is just about the risk weightings attached to different risk classes of lending - it doesnt proscribe how to define risk (ie on a loan to value basis etc) so should not affect the basis for lending

It has however been a spur for German banks to get shot of their mortgage lending books because of the huge amounts of capital they have to set aside for all their dodgy loans in East Germany and the Ruhr Gebiet

[QUOTE]It has however been a spur for German banks to get shot of their mortgage lending books because of the huge amounts of capital they have to set aside for all their dodgy loans in East Germany and the Ruhr Gebiet

Has nothing to do with Basel 2. I think you rather refer to so-called "junk-properties" or office-towers nobody needs - that was rather caused by greedy banks or people looking for ways to reduce their own tax-burden (which has
back-fired in many cases).

(Not that I care in the slightest, but..) Basel 2 makes risky/bad loans incredibly expensive for banks in terms of the Tier 1 & 2 capital that they must allocate to them. Less capital was required under Basel 1. Therefore, the movement to Basel 2 has made banks focus on reducing their risk weighted assets

The easiest way to do this? Sell the loans that you mentioned - those connected to junk properties, plattenbaus, anything to do with East Germany . It was not entirely due to the banks being greedy - they were positively encouraged to lend to anything and anyone in East Germany by the government. Again, you are right on the tax burden point - investors could claim tax deductions of 50% of their investment - so they invested in anything, got the tax deduction, but then lost their investment as it was crap

If you are looking for a mortgage, do yourself a favour and fix the rate now. You won't see rates this low again for a long time (well, not for the foreseeable future anyway). You should be able to get 5y fixed @ 3.05-3.10 and 10y fixed @ 3.60.

I can only agree with luke, Get in now while the rates are low. I am stuck with 5,5% for the next 7 years ...

Stephen

Luke

What's your prognosis for interest rates? When do you expect them to rise again? Oh and by the way, who's going to win the 2:30 at Kempton?

Isn't Kempten flooded @ the moment ???

Stephen

Rate are going up ... just not today, nor the last couple of weeks for that matter. It really is a bubble at the moment, driven by supply and demand in bond markets and illiquid summer markets. But it will all come crashing down (or up in the case of rates) soon.

Sure, the only place for rates to go now is up but with Euro governments being forced to keep their budget deficits under control (and in case of all major Euro countries, being forced to cut them) and with consumers in most of Europe still not spending and (with increasing levels of mass unemployment) are not going to significantly increase their spending in the forseeable future, why would rates go up anytime soon?
I doubt Merkel or Sarkozy will make drastic changes to encourage private spending (Merkel now rejected a flat-rate tax) and they are not of parties that support large amounts of public spending. Italy also has some huge problems which are going to force spending cuts. So where will the demand for money come from?