All terms relating to the acquisition of real estate briefly explained.
ANNUITÄTENDARLEHEN – Annuity loan
An annuity loan is a type of credit for mortgages, which run from five to thirty years. The installments remain the same for each due date. According to the agreement, the installment is paid on a monthly, quarterly, semi-annual or annual basis. Each installment consists of interest and principal. With each payment, the interest portion decreases and the principal portion increases.
ANSCHLUSSFINANZIERUNG – Follow-up financing
If after the completion of the fixed interest period there remains an outstanding balance, follow-up financing ensues. The interest is renegotiated and may be higher or lower than it was before. Thus, the installment increases or decreases.
AUFLASSUNG – Title transfer
The purchase agreement alone is not sufficient to confirm the purchase of real estate. Through the purchase agreement, a notary must confirm that the buyer and the seller are in joint agreement. After the title transfer, enrollment in the land registry occurs, which completes the transfer of ownership.
BAUSPAREN – Savings and loan association
With a savings and loan association agreement, the prospective homeowner saves money at a fixed interest rate. After the agreement is approved, the saving party receives a building association loan at a previously agreed borrowing rate.
BELEIHUNGSGRENZE – Borrowing limit
The lending institution uses the financed real estate as security. The maximum limit of the building loan does not equal the full value of the home—it is only a set percentage determined by the credit institution.
BEREITSTELLUNGSZINSEN – Commitment fees
The payment of a building loan is carried out in several installments, each according to the progress of construction. For the yet unclaimed credit amount, the bank calculates commitment fees. The level frequently accounts for 0.25% per month, alternatively 3% per annum.
BEREITSTELLUNGSZINSFREIE ZEIT- Period free of commitment fees
The period for which no commitment fees are calculated, even though the full credit amount has not yet been requested. The length of the period differs from bank to bank.
BEZUGSFERTIGKEIT – Readiness for occupancy
A new construction is considered ready for occupancy once it is safely accessible and inhabitable. With respect to the occupancy parameters, the precise services of the construction company should be agreed to in the purchase agreement.
EIGENBEDARF – Personal need
The most common reason for the termination of rental contracts is initiation by the landlord, who is obligated to substantiate the termination in a proper manner. Personal need is only present in cases when the landlord themselves, or a relative, provides notification of the need for the living space.
EIGENKAPITAL – Equity
Owner’s savings that decrease the loan sum. Aside from bank deposits, equity includes cash, securities, building loan agreements and the redemption value of life insurance. Most creditors request an equity ratio of at least 20% for mortgaging.
EIGENTÜMERGEMEINSCHAFT – Ownership community
All of a building’s apartment owners constitute an ownership community. The precise ownership structures are recorded in the partition deed. Cohabitation is regulated by the house regulation and the building bylaws.
GEMEINSCHAFTSEIGENTUM – Community property
Facilities and arrangements of real estate that are neither in third-party possession nor individually owned. The community property is important for the building’s safety and condition. Examples are the property’s roof and the foundation as well as lines for electricity, water and gas.
GRUNDBUCH – Land registry
Official and public register that is managed by the relevant district court. The property relationships of real estate are entered into the land registry. This includes records of the size, type of use, liabilities, limitations and rights associated with the real estate.
GRUNDERWERBSTEUER – Property transfer tax
German state (Land) taxes applied to real estate purchases. The purchase price serves as the assessment basis. The stipulated amount of property transfer tax varies between Germany’s federal states. The levels lie between 3.5% and 6.5%.
GRUNDSCHULD – Land charge
The most important credit security when mortgaging. The creditor can stipulate a lien on property and payment in the event that the debtor does not properly fulfill their payment obligations. In such a case and to that end, the property and the corresponding real estate are put up for auction.
HAUSGELD – Maintenance costs
Advanced payment from the members of a community of apartment owners for the regularly occurring operating costs related to the shared part(s) of the building. A budget is established as the basis of calculation. Payment normally occurs on a monthly basis.
INSTANDHALTUNGSRÜCKLAGE – Reserve fund balance
Regular payment to the community property manager for the purpose of professionally resolving damages and paying for maintenance or modernization. Each owner of a condominium must pay a portion of the reserve fund balance. The amount of one’s portion is determined by the size of one’s condominium.
KAUFPREISFÄLLIGKEIT – Outstanding purchase price
In the purchase agreement, terms are laid out for when the buyer must transfer the purchase sum for the applicable real estate. The notary informs the buyer when the requisite clearance has been granted, all documentation is complete and the notice of conveyance has been settled with the land registry.
LASTENFREISTELLUNG – Release from encumbrances
When selling real estate for which a building loan still applies, the buyer desires to acquire the building or condominium without such encumbrance. Furthermore, the purchase contract includes an agreement effecting release from encumbrances. The seller ensures that they resolve any registered debts and arrange a solution to that effect in the land registry.
MAKLERPROVISION – Broker commission
The broker commission is also known as broker’s fees. It constitutes the buyer’s fee for a broker’s real estate services. The amount of the broker commission for real estate purchases differs from region to region. As a rule, brokers request between 5.95% and 7.14% of the purchase price including VAT.
NICHTABNAHME VON DARLEHENSTEILEN – Non-acceptance of parts of loan
Special agreements in credit agreements, which stipulate that part of the loan amount will not be requested as free of charge. Through the agreement, the calculation of the credit needs can be more flexibly established or a higher level of equity can be integrated.
NOTARIAT – Notary office
Notary office refers to the office of a notary. In Germany, every real estate purchase must be certified by a notary. For that purpose, the buyer and seller meet at the notary office, where the notary reads the purchase agreement aloud. All plans, photographs and drafts belonging to the purchase agreement are submitted for inspection. The buyer normally bears the notary cost of 1.5% of the purchase price.
SOLLZINSSATZ UND EFFEKTIVZINSSATZ – Borrowing rate and effective rate
The borrowing rate is the rate of interest that the debtor has to pay for a loan. It includes no fees or extra credit costs. These are included in the effective rate, which is more informative when carrying out a credit comparison.
SONDERKÜNDIGUNGSRECHT LAUT BGB – Special termination according to German Civil Code (BGB)
As per Section 489 of the German Civil Code (BGB), a building loan may be completely or partially terminated 10 years after pay-out of the loan sum with a term of 6 months. Moreover, the credit agreement must include an agreement about a fixed interest period of at least 10 years. The creditor shall not stipulate prepayment penalties for premature credit termination.
SONDERNUTZUNGSRECHT – Right of special use
A joint-owner’s right that is agreed to in writing stipulating sole utilization of a clearly defined area of the collective property, for example, a parking spot.
SONDERTILGUNGSRECHT – Right of special redemption
A right agreed to in the credit agreement stipulating the provision of additional repayments. Through the right of special redemption, the installment decreases or the building credit is paid back quicker.
TILGUNGSSATZWECHSEL – Alteration of repayment rate
A loan installment consists of an interest portion and a principal portion. When an alternation of the repayment rate has been agreed to, an owner can, in event of changes to their financial situation, flexibly adjust the installment.
UNBEDENKLICHKEITSBESCHEINIGUNG – Clearance certificate
A notary must send the real estate purchase agreement, together with an official mandatory form, to the place of purchase. The tax authority confirms, through the clearance certificate, that it has no tax-related objections to the buyer being listed as the new owner in the land registry.
VORKAUFSRECHT – Pre-emptive right
According to law or written agreement, the right to purchase a property. If another buyer is interested in the property, the pre-emptive right enables the entitled party to by the house or apartment under the same conditions.
VORMERKUNG – Priority notice
A priority notice is entered into the land registry. All changes to real estate that are entered after the priority notice are ineffective in relation to the property buyer; for example a seller foreclosure.
ZINSBINDUNG UND DARLEHENSLAUFZEIT – Fixed interest and loan term
During the fixed interest period, the loan’s interest rate remains unchanged. As a rule, the fixed interest period amounts to five to twenty years. The duration of the loan, on the other hand, encompasses the complete term for paying off the credit sum until repayment is complete.