Like most countries in the world Germany also has its own, special mortgage system with unique features.
Most mortgages for expats – no matter whether they have residentially registered in Germany already or not – are based on the so called annuity system. Annuity stands for constant monthly or quarterly installments which consist of interest and principal. By paying principal the borrower reduces his mortgage residual with each installment. Thus, with the subsequent installment a little bit less interest has to be paid. The saved interest is used for increasing the principal portion to the extent which keeps the overall installment total unchanged. Needless to say that this approach results in an ever quicker reduction of the mortgage total over the months and years.
The installments in principal remain the same for the whole period the borrower has fixed interest rates for (most borrowers go for 10 years, but other periods are also common). Once the period of fixed interest rates has expired you can always repay the complete mortgage residual or parts of it penalty-free. You can only repay earlier in case you sell the property or upon goodwill of the lender. Nobody can know at present whether there will be a penalty then and if so how much it will be. In case of a break-up the lender takes the interest portion of each remaining future mortgage instalment (with every instalment the interest portion decreases whereas the redemption portion increases, the total instalment remains the same) and compares it with the interest he would get for it on an alternative investment at the capital market with each individual duration. If the return of the alternative investment is higher the lender stops as there is no damage. If it is lower he takes the difference between the originally agreed installment and the alternative investment return. The result of each is then discounted by the remaining duration and each individual interest rate. Possible options for extra, penalty-free redemptions are considered as if the borrower would have made use of all of them in the future – this reduces a possible penalty tremendously. A very small administration fee might be added no matter whether there is a penalty or not.
This is just an example how sophisticated German mortgages can become. There are of course some more aspects to be considered. Berlin Finance will help you to get you the mortgage which is most appropriate for you and your personal circumstances. Taking on Berlin Finance is absolutely safe for you as BF will not charge you at any stage.
One of BF’s features, which clients like most, is its free after-sales service. We do not just get borrowers a mortgage to say “Thank you and Goodbye” once a borrower has signed a mortgage contract. We also assist borrowers when the mortgage has to be drawn down and even thereafter – for example to get annual statements.
You can also count on us for accompanying services like the opening of a German bank account.
Well, as you can see we are ready to support you – now it is your turn to get us together:
Mr. Martin Bonnet
Phone: +49(0)30 21018765
Mobil: +49(0)177 7211149
Fax: +49(0)3212 7211149