Buying an apartment without a large down payment

I pay relatively high rent in Munich and was looking into buying an apartment (Eigentumswohnung) and was told by the bank that I needed a minimum of 55,000 € down payment (Eigenkapital). They also didn't like that I was an ausländer.

Any advice on what bank to go to get a better deal?

I only put about 35k down payment..

I used the KSK München Starnberg.. However, my company bank there, and we have had contact with them for many many years..

What sort of price range are you looking at borrowing.?

G

around 200,000.

Years ago I had the same great idea - and got laughed out of the bank. Basically as a single, 20 something, foreign woman I didn't stand a chance.
Now that I have been with the same company 14 years and earn a fair enough salary, I could probably work something out, but they still want a chunk of change deposit.
I did hear of someone here financing a house with no down payment, with Diba, but that was a double income couple, one of them being a German man with a decent income.

The Hypo wanted me to put 10% down, they would have accepted less, but they would have increased the rate of interest on the loan.

They offered me a good deal, but I'd been banking with them for about five years and had a good credit rating with them.

I paid for mine in used fivers from a big suitcase that I kept under the bed. Only problem was that they wanted the case as well so now I keep the cash in the freezer. It's a cunning plan because if the government ever want to freeze my assets they'll find I got there first.

The LBS financed an investment property i bought to 100% last year, but i still had to cover costs. Notar, Makler, Grundsteuer. etc. Some places will do 100% for higher earners, but 20-30% Eigenkapital is stll asked for by a lot of lenders. If it is the first property you are buying, depending on income level and tax burden, it can make sense to stay living in rented accommodation and rent out the place you buy. If you do this a Bausparplan works well.

Not such an original idea, Keydeck:


http://en.wikipedia.org/wiki/William_J._Jefferson

I heard Rep. Jefferson was going to use the money to buy a flat in Munich, too.

It won't be easy if at all possible and if you are going anywhere near leased land, the city of Munich will stop you in your tracks no matter what bank financing you have arranged.

I know its impolite to talk about money but everybody mentions "if you have a decent income". What is considered to be a decent income. I am also thinking of buying with my German girlfriend and both of us are working. was thinking of 100% financing also.

By the way I understand that you should plan about 7% costs on top of the buying price for Notar and so on...in case anybody didnt know

Anyone tried to get (and Got!!!) 100% financing!!! ? Would just like to know

many people here buy to rent and continue to live in rented accommodation. there are not inconsiderable tax breaks when buying to rent, especially if the property (ie entire apartment block/old factory, etc) is being renovated for this purpose.

property prices increase soooo slowly here in general, that you're better off investing in something else. don't buy to make a quick or in many cases, any profit.

Rumour has it that 100% financing is possible if you can fast talk the bank into agreeing to it. They will only finance the cost of the property so you will HAVE to put up the 7-10% in notary fees, estate agent fees and tax. Most banks want you to put up at least 10% of the property price as well. So you're actually talking 20% of you overall costs.

The planethome site run by the hypo has a range of useful tools that can be used to calculate what the banks might be prepared to offer you. See

http://www.planethome.de/-snm-0135033904-1...x.jsp&coop=none

I was looking last year and went to a few banks. Luckily because my girlfriend is german it wasn't a No No from the beginning.

However, this is want I found - 20% deposit is the norm but not necessary. They will decrease this if you earn more or have a good (I get the impression that is over 3/4k Euros per month) and/or have long standing relationship with the bank.

You can also take out saving products with the bank - which means they are more likely to give you money since they've already made profit giving you a shit interest on a saving product i.e. haussparbuch or something! (There's that stupid Advert about living with Mutti - it's that product!) You can also choose to pay only the interest - also taking out or products like life insurance which will pay out when it is time to pay of the capital.

If you use your own bank - it doesn't make the market so open and flexible (since I can't buy everyone's products nor have a/c everywhere). Overall, you should budget for another 7% to 10% for the makler, taxes and lawyer etc. That would make financing around 15% to 30%.

So on paper you can get 100% financing but if you do get it - let us all here know!! :

At that kind of deposit/cost rate it makes out on a 300k house 75k deposit - so a lot for a first time buyer. If we were in the UK on our salary we could buy the same house/apartment now without waiting to save...na ja that is the german market.

In the end - we've decided to save rather more since we've only got 10/15% of the required monies but don't want to pay such a high rate interests and would like to get the 'family' home now as you don't want to be selling and buying again in 5 years since the transaction costs are too high...

anyhow, that was my experience...

SSS - Still saving Stanford...

I can't see how getting a 100% loan is a good idea anyway..

For an apartment in Munich for example, one worth 300k you would be paying around or maybe 1000 euros a month for. On 300k, you're paying 4% interest a year if you're lucky. That is 12k per year. That means that if you are making the same repayments, its just as good, if not cheaper to rent. If interest rates go up though, which is quite likely, you'll be paying more and actually not working off your loan at all.

I guess if house prices and rent go up, you'll be in a better situation, but you'll still have to put a lot of money into loan to make it go down at all..

Come and buy out where I live. We have a full selection of apartments from €10,000 up to as much €23,000 for a penthouse overlooking the pig farm. The locals also accept payment in bushels if that helps.

But eventually you will own the flat and not have to pay anything any more. With the pensions scheme in turmoil and likely to be drastically reduced, anybody who is still paying rent when they retire is going to be, as they say in these parts, an arme hund.

But within that equation you must also appreciate that a huge percentage of what you pay the bank is just the INTEREST and not a capital repayment. So I agree that a mortgage is a useful enforced savings scheme for many people, but if you are responsible and intelligent then you there is no reason not to rent and save.

For instance:

€200,000 mortgage over 25 years means you are paying off €8,000 per annum and anything else you pay is dead money on interest. So you might still be better off renting and saving €8,000 per annum.

This is a very rough example. It is worse with a mortgage as the banks skew things so that you pay 99% interest in the early years, so if you try and pay it back after 5 years you will find that you have NOT paid off anywhere like €40,000.

The usual advantage (certainly in the UK) is that over 25 years the value of your house will have rocketed much higher than any compound savings.

But with house price inflation almost non-existent here there is no reason for anyone to panic that they are "missing the boat". If renting just ensure that you are also saving!

nicely put JE and exactly what i was referring to but you managed to explain it better than i thought i could!

my take on it is that if you can put a whacking deposit down (50% or summat), then with the lower repayments, you can also afford to invest a decent amount at the same time, making it a more valid combined investment programme.

if you want to settle here, then go for it but don't do it just for a few years and then think you can move and you'll have saved money compared to renting.

I guess another point to take into consideration with the 25 year loans, is that in 20 years time, your 1000 euros a month that you're paying will be what you earn in one day.

20 years ago, how much was rent per month? Must be loads less than we pay now. Any old guys here want to confirm?

The rent on my place 10 years ago is the same as it is now If that's any help...

We're going to try and get the finance with either ING Diba, Interhyp or ABN AMRO. Apparently ABN will potentially finance 105%, that's only what we heard, haven't spoken to them yet. The other two have been recommended for 100%. In our case, as I'm sure it is with most, our savings will be going towards the legal fees, tax usw. It's a shame the property market is so much against buying here...

@DDBug

Does that mean that you're paying low rent, or that rental prices are the same now as they were 10 years ago?

It means they have never raised the rent here, which was not particularly cheap (or outrageously expensive) when I moved in. So it's still not really really cheap. However, the nebenkosten or the "second rent" has jumped - and that will do so whether you rent or own.

If I could have, I would have bought, but now is not a good time in life for us to be moving, and I wouldn't have the time to find the dream place in this neck of the woods, where I want to stay for at least 3-4 more years...

The last place I rented was a place in Garching, 110qm 3-bedroom apartment and it cost about €850. That was in 1991. The mortgage on my 4 bedroom End of terrace house (3 Floors) cost about €1400 when I bought it, but because various loans have been paid off over the years through Bausparplans it is now about €1000 and will be all mine in another 10 years. Of course I llive 30km north of Munich. It would cost more if it was closer to the city. (To buy in the first place ,I mean, not the cost of the loan).

I am told that the housing (rental and buying) market is stagnant. If that is the case why are so many people building houses virtually in their back or front garden and why are so many apartment complexes being built. People must be buying these properties and then renting them because most of them are occupied as soon as they are built. There must be some sort of bandwagon to get on and it would be great if someone could enlighten us.

It used to be the case that if you built for the purpose of renting out you got huge tax breaks, which meant that as long as you had it rented out, the tenant and the government paid the mortgage for you, however I think this may have changed recently.

So houses haven't gone up in value at least since the early 90's? That seems crazy, man, houses must have been completely unaffordable back then..

For example, in Brisbane where I'm from, a house that was bought for $100k in 1990 would be worth almost $400k now. This might be a special case because it really has soared in the last years, but still, seems strange..

@TopCat_1,

I have dicussed this a lot with my girlfriend and we believe it is to do with the tax write off or something. It seems it may be so advantageous in Germany that Builders are willing to take the risk in building new property without the demand. We have seen many new properties empty for over a year but they haven't reduce the prices...

Maybe someone else is a bit of an expert on this one and can tell us what tax advantages they get and other hidden government supports?

Edited Hutcho...RE: house price inflation.

it is not strange - most of continental Europe ran their economies without house price inflation since the 2nd WW. It has only started to change in the last two decades in places like Spain, France and Italy (who all now have UK/USA (Anglo-Saxon) style house inflation). Alas Germany still runs it's economy without it.

Maybe the properties have already been bought by investors who are trying to rent them out ?

topcat1, you need to contact one of the ubiquitous financial advisers here for more info. i know that a couple of years ago, ours was trying to get us to buy to rent for tax reasons. as we're now poor, their interest in us has dwindled (thankfully). however, i know that many germans who can afford it often have several properties which they rent out for this reason but still rent themselves unless they inherit the family house. as allershausen says, this may have changed recently but i'm not sure. i have a few friends who've done this so can ask.

They have gone up but not by much, I reckon mine may be worth about 25% more that what I paid for it in 1991. Yes they were very expensive and are now, compared to earnings, well mine anyway, relatively cheap.

Property in Ireland is where it really was at; buy a bungalow at 2000 and sell it for 500,000 and retire to Spain with the proceeds. I remember when house prices started to rise in different areas that people got scared to buy because the bubble might burst. The people with balls bought and made a killing and prices are still rising.

@grassenger

I know a few people who are doing it but they still maintain that there is not a great deal of money to be made in it and when i ask them why they are doing it they do not have a straight forward answer that makes financial sense. I would be interested if getting more information certainly.

@Allershausen,

25% however with inflation and the cost of owning that house that is more or less 0%.

General Point:

In the end, I decided to stop fretting like a Brit...since rents are low and relatively fixed or stable - I'm not going to worrying about buying as long as I can keep on saving.

Hopefully one day I can afford my dream home in germany!!! And when I do buy it - I will buy it to live in not speculate - and should the situation change in Germany then all well and good but I shalln't count on it.

Yes you're right, I'm not claiming it was an investment, they are just the facts. I am glad I decided to buy though, the freedom to do what you want with the place is priceless and as I already mentioned it will stop costing me anything in 10 years.

@Alleshausen,

I was just making that point especially from a Brit mentality point of view and agree it is better to buy for the pleasure of owning your own property and then being rent-free one day.

Is it that much cheaper out of Munich?

I would consider going further out but my other half - hates the idea...so we are stuck looking at South Munich which is very expensive...Solln and Perlach for instance..

Here's a couple of links to financing brokers:

www.immobilienfinanzierung.de
www.baufinanzierung-heinz.de

They are offering to finance up to 110% without any Eigenkapital. There's probably terms and conditions involved but it might be worth checking them out.

Boba

What the hell is financing up to 110% ? Do they give you a few bob for going down the pub to celebrate your purchase ?

The purchase price is only the start of it. The notar puts a mask on and empties your bank account, the government take their ransom money and if there's a makler(spit, spit) involved you are going to be very quickly penniless.!

Possibly to cover fees and tax over the asking price. Do houses here come with kitchens and bathroom fittings ? Maybe they are extra as well. But money to go and celebrate sounds like a marketing idea that might catch on.

Oh you don't have to tell me about Notary fees. I'm still the guarantor of a house loan here until I get the cash together to pay the notary to change the documents. Seeing as I could just about finance a nice semi-detached matchbox at the moment this isn't going to happen for a while.

Anyway like topcat said it's a probably a marketing ploy, you're going to try to build an extra lump into the mortgage anyway for all the extra stuff and believe me with a house there are always extras.

I know that I am going to be in Germany for at least another 15 years , so should I be buying a property here by mortgagging my last pair of boxers or should I be investing in rental property somewhere else. with proper returns ?

depending on direction and how far out you can live, property prices can plummet. i scan through the properties in the local erding free rag each week and if you're prepared to go native, you can have a 150sqm house (living space, c.200sqm total) with 500-1000sqm ground for under 300k. but that does mean going beyond the end of the s-bahn and as you know that's bandit country

Listen laddie, where I live the bandits have to move in packs of 12 because we waylay them and suck the flesh off their bones (not enough telly you see). The only way I can go more native is to get a second tattoo of Edmund stoiber on my other buttock.

I keep an eye on the prices down here near the Ammersee as I would love to buy an old farmhouse because I need a barn for , ah, storing hay. thats it.

From the amount of houses available I have a feeling that the move out of Munich has stopped or slowed and people are more interested in living in the city again. So maybe the prices will fall more here. The thing is I'm pussying out of getting a mortgage which is stupid as it's probably the cheapest money you can get.

Grazzenger,

They sound like great prices but it's North Munich.

As far as I've heard south Munich...near Starnberger etc is still similiar to Munich...in relation to the out in the sticks cheap price ratio...

I am of the mind to save for another five years and then look again at the market...or move to Spain...opps that's now bloody expensive too. At least I can sit back and cross my fingers and hope...

Edited: My girlfriend doesn't like North Munich...so no chance I will be moving to Erding... despite it giving me easy access to the Airport to work abroad to save the money to buy that dream house which I can't afford!!! na ja

mwahahaa yeti. nice.

yup, i'd like an old farmhouse too, for storing, er, farms, ah right ted.

so everybody, don't look out here, move to the big city. personally i'd like to live in the picturesque village of gruenbach near erding. it has its own weissbier brewery and a cracking golf club. even has shops. i need a big ol' garden to acccomodate my skills as a garden designer and desire for a real stream and pond plus a wee par 3 over said pond.

EDIT: yup stanford, well more north-east but that's hair-splitting. south of munich is de-fin-itely not cheap. what, you want a city and mountains on your doorstep? and for what? 5 bob? keep saving, i'd love to live down there.

Isn't the Erdinger area a bit pricey due to proximity to the airport ?

The south of the city is the place to live, lakes, mountains and Andechs. Plenty of commuter links to Munich. Not if only I could get Anna Nicole Smith to adopt me or something.

The biggest problem with living in the sticks is that once you get past the last S-Bahn station public tranport becomes almost none existant, especially at weekends, so you need a car and if there are two of you, you need two cars. Going out for a night on the town involves either driving or spending a fortune on taxis.

erding itself is, but go 10kms or so east or south-east from there and the prices really do plummet. if they ever install that rail link from dorfen to the airport via erding then things will change. i'd quite like to get in before then.

You really only need a banger to get you to the S-Bahn or the train and believe me after you buy a house you will suddenly discover the dubious pleasures of drywalling and gardening. A night on the town will suddenly becoming a Saturday at Obi and Handwerker Magazine your new playboy.

Allershausen,

My girlfriend lived in Wiesbaden for years and commuted to Frankfurt for work and play...(the clubs in Wiesbaden are shit). So when we moved to Munich she said she wanted to live closer so she could go out at night without having to driving all the time.

I suppose that would be huge change in our freedom...if we went to live in a dorf somewhere.

I have even noticed since leaving the Westend in Frankfurt where I could literally walk to the town centre in 2/5mins, how even having to take an S-bahn (S-7 20 minutes) into the Centre makes a huge difference. Especially coming out of bars and clubs drunk - I was able to walk home. From Solln I can end-up paying just 40 Euros for a taxi in to Town and back...

Edited: Do Taxi drivers earn a good money because I spend a small fortune on them???