Finance for Germany

Hi all,

I'm new to this, so apologies if this question has been asked before. I'm currently trying to buy an investment property in Germany. The seller has spoken to Deutsche Bank on my behalf and they've said they'll provide 60% finance.

Has anyone here managed to secure more than 60% funding in Germany? Or alternatively has anyone managed to raise the finance in Ireland for an Investment property in Germany?

Try interhyp, a German based intermediary for mortgages under www.interhyp.de .
You'll get Irish finance if you are having an Irish proprty to secure the loan against.

Good luck,

Cologneboy

I too am interested in investing in Germany and I am currently doing my research. I have a few similar questions that I would appreciate help with (especially if anybody has actually bought in Germany):

- Is mortgage interest an allowable expense against German income tax? I am aware of the double tax agreement with Germany.

- If you can arrange finance in Ireland (e.g. Irish home equity release), can you offset interest on that loan against German income tax? (On these boards I saw that this was possible in France)

- If you have to arrange a mortgage in Germany, what is the maximum finance that anybody has secured?

I would appreciate any help - I searched the boards and did not find answers to these specific questions.

Thanks,

Derek.

You are aware that you have to make a return to Irish revenue as though the house was purchased in ireland i.e. accodring to irish rules. You also have to make a return to german authorities. Any tax paid in germany is then offset against Irish tax.
I have heard that tenants have very strong rights in germany. Rents very rarely change. It is very unusual for germans to own their house - you have to ask why.

Transactions costs, I am to believe, are quiet high in Germany, something like 8%.

Banks are very conservative in ther lending policy because of the massive debts that have written off because of the integration on eastern germany.

Also lenders are more willing to lend to employees with a regular salary than to someone like myself who is 14 years successfully self-employed. Consequently the loans to employees will be bigger, but at your figure of 60%, is not as good as other countries.

Hi Del3D,
I'm not too much up on the double taxation agreements, but you can secure a loan in Germany pretty similarly to Irealnd. You may have to try a few banks to get the best deal, a friend of mine got 100% finance for a 110K appt. Also the comment that rents rarely change in Germany isn't entirely true - a landlord is legally entitled to change rent twice every five years, although they cannot be increased >20% in a 5 year period. Although I would say renters do have more rights in Germany.
As for transaction costs... I would think it is comparable, or cheaper than Ireland. I understand regardles of price bracket in Germnay it is 3.5% Tax, 1.5% solicitor, and ~3.5% EA... whereas in Ireland seller pays EA ~ 5%, which is really passed to the buyer as a hidden extra (and I'll say nothing about the cost of Irish stamp duty ).
Best Regards,
Darragh.

ps. if you speak german you may get some tax tips in this forum - http://www.steuern-online.de/foren/vermieternetz/index.html

Thanks darraghdog,

That is very useful - I don't speak German, but it works well through babelfish.altavista.com

Yes, I agree completely. I spoke to an estate agent last weekend when I was over in Berlin (just getting an idea of the areas) and the fees were 4% estate agent, 3.5% tax and 1.5% notary. That's 9% and is not much different than here (if not cheaper!). It's unusual for Irish people to pay the estate agent's fee as the buyer, but it works both ways - When you sell there may be no fee (depending on the way you price?) and when you rent the tenant pays the agency fee (up to 2 months "cold" rent). I'm happy with the fees and I am happy enough with the rents/conditions etc.

Berlin is a beautiful city but you have to look at the area ... It was amazing to see the poor conditions of one or two of the areas that some of the "glossy brochure" apartments were in.

However, I am not happy with 60% finance and it was great to hear of the possibility of up to 100%. Just to clarify, your friend that got finance in Germany - Did he have a job in Germany at the time? Was it a typical high-street bank? Did he have a "regular" enough income?

Thanks again,

Derek.

Hi there,

EA fees can easily be avoided by buying directly from the vendor or by byuing from property companies like Grund & Geld, Grund & Boden.

So, the higher your investment, the better it compares to irish transaction costs, as 'Grunderwerbssteuer' (stampduty) remains 3.5%.

Make sure to use a surveyor, this will help you with financial institutions to secure a higher LTV rate.

cologneboy

Del3D said:

Did he have a job in Germany at the time? Was it a typical high-street bank? Did he have a "regular" enough income?

Click to expand...

Hi, he had a regular income, he was working in germany and I think it was deutsche bank. If your over there, I'd try to pop into a few of the banks and ask them - I guess it more depends on the flexibility of the person your talking to. When I was working their, the bank said somebody in Ireland could get a loan as long as they could prove their income.

Thanks all,

I'll put some time into trying to organise finance in Germany. I will let you know how I get on. I have to say I really liked Berlin - nice people, seemed to attract a younger crowd, amazing public transport (I would dump my car if Dublin was like that - Luas(es) on every main street), nice food, looks like a growing tourist destination.... In particular I like Berlin-Miete - at the worst case I will have a holiday let, or a holiday home.... I have allowed myself 6mts to get everything in order before I pick a particular property.

Hi Del,
Did you visit the area of Charlottenberg when there ? I know of an apt for sale there overlooking Lietzensee Park & was wondering if it was worth going over for a look.
A lot of people are tipping Berlin at the moment & seeing as it's at rock bottom, there's very little to lose.

Good luck with your venture

Hi Perplexed,

I did visit Charlottenberg and I really liked it - It seemed to be nicer within the S42/S43 rail ring. It was quiet (almost surburban) and had nice West German property style. Transport with the S/U seemed sparser than other parts of the city as I seemed to have to walk further between stops. Correct me if I am wrong, but Lietzensee Park is south of Schloss(spell?). I walked down the B5 and turned right for Schloss (coming up from the south) so I didn't get that far south, but it seemed like a nice part of the city.

I went over to visit Friedrichshain, Prenzlauer Berg, Charlottenberg and Miete. After visiting I would put them 1) Miete, 2) Charlottenberg, 3) Prenzlauer Berg and 4) Friedrichshain. 1&2 were quite mature and most areas looked great, but 3&4 you really had to be careful where you buy (e.g. one property I went to visit in Friedrichshain looked great on the web, 130 m2 for €160k, but to the left was a squat, across the street was another squat and in front was a burning skip - long term it will be fine, but you could spend the money in a nicer area).... I have some photos of parts of the city if people are interested.

Obviously these are GROSS generalisations, subjective and there are exceptions in each area. P.S. Google Earth is fantastic for getting an overview of Berlin... The resolution of the images is excellent.

Thanks a million for that report. I really will have to go & look for myself but it's great to get an honest assessment from someone without a vested interest.

By the way I hear it's quite difficult to get a mortgage in Germany. I'm a banker & from the no of mortgages I've seen being done for Berlin property it would seem like most people are financing here.

Good luck

As previously mentioned, stamp duty is 3.5% and solicitors fees about 1.5%. However the fee that the purchaser has to pay to the estate agent (Makler) varies between the federal states (Bundeslaender). In Berlin, the typical fee is about 7% - though some estate agents will agree to less. In Bavaria, it is about 3%. Often you do not have to pay any EA fees for new properties

Forgot to say german banks are generally quite conservative and will only offer a max of 80% finance. This is slowly changing with internet banks like interhyp etc.
Also variable/tracker rates are almost unheard of there. You generally fix your interest rate for 5 or 10 years and say how much capital you would like to pay back over this period. At the end of the 5 or 10 year period you negociate a new morgage.