Finanzleuchte: Willkommen beim Finanzleuchte Baulexikon

Acceptance Obligation: The obligation of a borrower to take out the loan within an agreed period (acceptance period).

Acquisition Costs: The acquisition costs for a property include not only the purchase price but also ancillary costs such as real estate transfer tax, notary and land registry costs, broker's commission, development costs, and financing costs. Since depreciation is only possible on the building and not on the land, the acquisition ancillary costs must be calculated proportionally.

Acquisition Costs: Acquisition costs encompass all expenses incurred when purchasing land or real estate. These costs include real estate agent fees, court and notary fees, surveying costs, registration in the land register, and soil investigations. For properties not intended for self-use, acquisition costs can be tax-deductible.

Additional Security: Additional securities are collateral required when exceeding the loan-to-value limits or when the creditworthiness is not sufficient. These may include additional properties, guarantees from banks or employers, co-obligations of relatives, as well as the pledging of bank deposits and securities. These additional securities are used to reduce the credit risk for the lender.

Agio: For the provision of a loan, some banks charge an additional fee, known as Agio. The loan amount is paid out in full, but the borrower must repay a higher amount.

Allocation: Once a building society savings contract reaches the minimum savings balance, minimum savings period, and bonus calculation rate on a specific maturity date, it can be allocated - that is, paid out. The saver must take action to request the allocation, as the contract will only be allocated if requested.

Allocation Number: The allocation number ensures a fair allocation order for building society contracts. Factors such as the duration and amount of savings contributions are taken into account. To be allocated a building society contract, the minimum allocation number set by the building society must be reached.

Amortization Loan: When a discount (disagio) is agreed upon in a mortgage loan, the borrower receives a reduced amount at the time of disbursement due to the discount. This creates a financing gap that needs to be covered by a so-called deferred repayment loan. During the repayment of this loan, the main loan remains without amortization. This leads to an extended overall loan term.

Amortization Schedule: A chronological representation of the loan's progress from disbursement to scheduled repayment. The tilgungsplan provides information about the amount of the monthly installment, the interest and amortization portion, and the remaining debt. The presentation can be done on a monthly or yearly basis. The tilgungsplan can provide exact figures only for the duration of the fixed interest rate period. When a new fixed interest rate period is agreed upon, an updated tilgungsplan is necessary.

Amortization Settlement: "Amortization Settlement are used to reduce the remaining debt at regular intervals. The Amortization Settlement specifies the timing for this. For example, if ""immediate Amortization Settlement"" has been agreed, the payment will be immediately offset against the remaining debt upon receipt."

Amortizing Mortgage: A loan that is repaid through equal and regular installments. As the interest portion decreases with each payment, the amortization portion automatically increases (also known as annuity loan).

Ancillary Costs: When purchasing a property, the following ancillary costs arise: real estate transfer tax (3.5%), notary and land registry fees (1.5%), and possibly broker's commission (starting from 3.0% plus VAT). These costs should not be neglected when calculating the total investment. After the acquisition, ongoing ancillary costs in the form of operating and maintenance costs occur. They should be taken into account when determining the monthly expenses.

Ancillary Services: Ancillary services are all payment obligations of the borrower that go beyond the interest and principal payments, such as commitment interest, appraisal costs, partial disbursement surcharges, or guarantee fees.

annuity: A yearly payment on a granted loan that includes both interest and repayment. The amount of an annuity remains constant throughout the entire fixed interest rate period.

Annuity Loan: A long-term loan that is repaid by the borrower in constant loan installments (the so-called annuity). The annuity consists of both interest and repayment. During the term, the interest portion of the installment decreases, while the repayment portion increases due to the saved interest amount.

Appraisal costs: Appraisal costs are the expenses incurred during the valuation of a property.

Assessed Value: A standard value determined by the tax office for land and buildings, which is used, among other things, to calculate property tax. The value is significantly lower than the actual value of the property and is communicated to the owner through the unified assessment notice.

Assignment: Transfer of rights and claims to a third party. For example, if a borrower has a claim to the payout of a capital life insurance policy, this claim can be assigned to the lender. In the case of real estate financing, rights and claims from building savings contracts, investment funds, and land charges can also be assigned.

Aval: In an aval, a credit institution provides a guarantee or a surety. The institution does not provide a sum of money but rather its own creditworthiness. In the case of a surety, the institution commits itself to be liable to a third party for the obligations of the borrower. In the case of a guarantee, it commits itself to ensure a certain future success.

Broker's commission: Broker's commission is a fee that must be paid to a real estate agent for the mediation of real estate. The amount of the commission is freely negotiated and is usually between 3% and 6% plus VAT of the purchase price.

Building Application: A written application to a building authority for a building permit. To initiate the building permit process with the building application, the following documents must be submitted: Site plan with calculation of living and usable areas, scale 1:500, architectural drawings (floor plans, elevations, and cross-sections) in scale 1:100, calculation of enclosed living space according to DIN 277 Part 1 (issued in 1987), drainage plans, structural calculations, construction descriptions, proof of liability insurance of the design author, proof of structural stability, thermal and sound insulation, and a building permit application form signed by the client and the authorized design author.

Building Code: The building code is established at the state level. It not only governs the procedure for obtaining building permits but also sets out the substantive legal requirements for the construction, alteration, and demolition of buildings.

Building Defects: Deficiencies in a building that result from faulty designs, executions, or poor-quality materials and reduce the value or suitability of the building. To potentially assert claims for rectification or warranty from the responsible party, property owners should raise a written reservation during the building acceptance process if they detect any visible damages.

Building Line: The boundary specified in the development plan (Bebauungsplan), which, according to § 23 of the Building Utilization Regulation (BauNVO), must not be exceeded by buildings or parts of buildings.

Building Loan: A subordinate construction financing loan granted by building societies (Bausparkassen) for residential purposes. The saver, depending on the tariff, saves, for example, 40% or 50% of the target savings amount and then receives a building loan corresponding to 60% or 50%, respectively. The advantage of building loans is the relatively favorable interest rate. However, it should be noted that the encumbrance of the property by building loans must not exceed 80% of its appraised value.

Building Notification: A building notification is directly submitted by the property owner to the responsible building authority. With this notification, the property owner announces a construction project that does not require a building permit.

Building Permit: A formal procedure required by the building regulations of each federal state for the approval of a construction project. The building permit is time-limited and subject to fees. Construction work may not commence without obtaining a building permit. In some federal states, a building notification is sufficient for certain construction projects.

Building Savings: Regular saving to obtain a loan for residential purposes. After concluding a building savings contract, the saver is obliged to accumulate a predetermined minimum amount. After the savings phase, they acquire the right to a low-interest building loan. Due to the tax advantages and the subsidies through the housing premium and the work-related savings allowance for asset-based benefits, building savings remains a popular method of real estate financing.

Building Savings Contract: A contract with a building society through which the borrower can receive a building loan after accumulating the building savings sum.

Building Savings Credit Balance: The sum of the building savings contributions already saved in a building savings contract, including the interest.

Building Savings Sum: The amount for which a building savings contract is concluded. It consists of building savings credit balance and building savings loan. The amount of the building savings sum determines, among other things, the amount of the initial fee and the monthly repayment contribution.

Building Savings Tariff: The respective building savings tariff specifies the interest rate on the savings, the minimum savings amount, the minimum term, and the loan interest rate. The tariff also sets the fee that becomes due when the contract is concluded. Building societies usually offer various tariffs.

Building Society: Building societies are credit institutions whose business is aimed at accepting deposits from savers and granting them loans for housing-related purposes from the accumulated amounts. The business of building savings can only be operated by building societies. (Building Society Act § 1.1)

Cadastral Map: Cadastral map is a map that depicts all land parcels within a cadastral area. This map can be viewed and obtained from the relevant land registry office.

Capital Accumulation Benefits: Savings benefits provided by the employer under the Employee Savings Act. These benefits are transferred directly from the employer to the investment account of the employee. Deposits into building society contracts and productive capital investments are eligible for the employee savings premium. The employee can request that the employer transfer the difference between the paid VL and the maximum amount of 40 euros to the investment account at the employee's expense.

Capital costs: In the field of real estate financing, capital costs refer to the interest that a customer must pay for the borrowed funds used for financing.

Capital Investment: In addition to the personal use of residential property, a property can also be rented out or leased. In such cases, the acquisition of the property becomes an investment aimed at generating a high profit. This profit is achieved through rental income and various tax advantages, among other factors. The main goal of a capital investment is to generate a return on investment and build wealth over time.

Certificate of Separate Ownership: Certificate issued by the building supervisory authority stating that the individual units in a building are separated according to the Condominium Act (WEG). This means that they are structurally separated from the other units and have their own lockable access from the outside.

Clearance Certificate: An official certificate issued by the tax authorities confirming that the buyer of a property has paid the real estate transfer tax. The clearance certificate is required for the transfer of ownership registration in the land register.

Client/Property Owner: A client or property owner is a person who carries out or has a construction project carried out in their own name and interest. The client bears the risks of preparation and implementation, including the risks of the client's liability, and makes decisions regarding both the architectural and technical design and the financing.

Closed-End Real Estate Funds: Closed-end real estate funds invest most of their shareholders' money in commercial properties. These funds usually limit their financing to one or a few properties. Unlike open-ended funds, the total capital of closed-end funds is fixed. Investors become either co-owners of the properties or shareholders in a limited partnership or civil law partnership. Closed-end real estate funds are suitable for investors who want to participate in the economic benefits of a property with limited capital investment and without the burden of property management while seeking tax advantages.

CO2 Building Renovation Program: Through its CO2 building renovation program, the KfW (Kreditanstalt für Wiederaufbau) provides favorable loans to owners of old buildings for renovation work that significantly reduces the energy consumption of the property. This program can be applied for through us.

Collateral Property: Collateral properties are plots of land, houses, or condominiums that serve as security for a construction financing. The bank's security is usually ensured by the registration of mortgages or liens on the property.

collateral property: Collateral property are plots of land, houses, or condominiums that serve as collateral for a construction financing. The bank's security is usually established through the registration of mortgages or liens.

Commission: The fee of a real estate agent for concluding a contract. Usual commission rates for rentals are one to two monthly rents. For real estate transactions, the commission is typically 3% to 6% of the purchase price.

Commitment Interest: Fee for the loan or loan portions provided by the credit institution and not yet used by the borrower. The commitment interest is usually 3% per year or 0.25% per month.

Common Property: This term is commonly used in connection with condominiums. common property includes parts of the property and building that are not individual ownership or the property of a third party. This includes all building elements necessary for the stability and security of the property, such as the facade, roof, staircase, elevator, electricity, and water lines, as well as outdoor facilities. The common property is collectively managed and maintained by all co-owners.

Conditions: Conditions refer to the terms and costs under which a lender is willing to provide a loan. These include: nominal interest rate, duration of fixed interest rate, payout rate, repayment rate, commencement of repayment, processing fees, and commitment fees. The most favorable financing can only be determined by considering all key points and through careful comparison of the overall conditions.

Conditions Adjustment: At the end of the fixed interest rate period, new conditions must be determined for the following period. Customer requests for changes can be taken into account at this time (e.g., loan amount, repayment rate, etc.).

Condominium: When purchasing a condominium, not only is individual ownership of the apartment acquired (special ownership), but also a share of ownership in the common property (shared ownership). The ownership conditions are regulated in the German Condominium Act (Wohnungseigentumsgesetz).

Condominium Ownership: Condominium ownership includes both the individual ownership of an apartment and the co-ownership share of the common property (e.g., the residential building and land) among all apartment owners.

Condominium Ownership Act: The legal basis for condominium ownership in Germany. The Condominium Ownership Act defines condominium ownership and regulates the rights and obligations of apartment owners.

Connection Costs: Costs for connecting a property to the public utility network (from the house to the property boundary), such as water supply, wastewater disposal, gas or electricity supply, and telecommunication.

Construction All Risk Insurance: A construction all risk insurance covers damages that may occur during the construction phase to the property, building components, or construction materials. These damages can be caused by natural disasters, theft, or vandalism.

Construction Description: A detailed list of the equipment and design features of a construction project. Important contents of the construction description include, for example, the quality of walls and roof, heating system, type of windows, etc. It also provides precise information about the materials used in the construction. Due to its importance in assessing the quality of a building, the construction description is a central component of the financing request. Furthermore, it must be included with the application for a building permit.

Construction Financing: Most people need construction financing when they want to buy a house or an apartment. For this purpose, they take out a loan from a bank and repay it over a period of several years or decades. If a borrower applies for their construction financing through us, they do not have to inquire with banks themselves and compare different offers but receive a construction financing tailored to them without much effort.

Construction Incidental Costs: Construction incidental costs include expenses for architectural and engineering services, fees for official inspections and approvals, and financing costs, among others.

Construction Insurance: Nowadays, construction insurance is referred to as building insurance. This insurance covers damages that occur during the construction phase to the property, building components, or building materials. These damages can be caused by natural disasters, theft, or vandalism.

Construction Liability Insurance: This insurance covers damages that third parties could suffer on a building site or due to a construction project and for which the client may be held liable.

Consumer Credit: A consumer credit is particularly suitable for amounts between 5,000 and 50,000 euros. Unlike the traditional mortgage financing, it does not require the entry of a mortgage. Therefore, consumer credits are particularly advantageous for tenants and property owners whose property is currently heavily encumbered by an active mortgage. Consumer credits are characterized by a fixed monthly installment over the entire term (up to ten years) and always include a flexible right to make special repayments.

Cost Approach: The value of owner-occupied properties is determined using the cost approach. It is derived from the land value, building value, and value of outdoor facilities. In practice, a deduction is often made when calculating the building value, which is why the assessed sachwert may be up to 30% below the actual acquisition costs. The cost approach is only applied to condominiums under certain circumstances.

Creditworthiness: Creditworthiness refers to the assessment of whether a loan can be granted based on personal and objective factors. To assess the personal creditworthiness of the borrower, a credit report from a credit agency, such as Schufa in Germany, is typically used. The objective creditworthiness is evaluated based on all documents related to income and expenses.

Creditworthiness: By law, only individuals who have reached the legal age of majority and are fully legally capable are considered creditworthy. However, minors under 18 years of age can be granted full legal capacity through a court declaration, and older individuals can have their legal capacity revoked under certain conditions.

Damnum: "A rarely used term for ""Disagio."" It refers to the difference between the nominal amount and the actual disbursement of a loan. The Damnum represents an upfront interest payment that leads the bank to reduce the nominal interest rate. For investors, Damnum can be of interest for tax purposes as it is considered part of the borrowing costs and can be deducted as advertising expenses."

Debit Rate Commitment: (=Fixed Interest Rate) Refers to the period during which the agreed-upon nominal interest rate is fixed in the loan contract between the financial institution and the customer. The nominal interest rate remains fixed during this period. After the end of the fixed interest rate period, the customer has the option to switch to another financial institution or renegotiate the interest rate.

Debt Assumption: In a debt assumption, the current borrower exits the loan agreement, while a new borrower takes over. This process requires the consent of all parties involved. Debt assumption can only be done through a notarized contract or the notarial certification of a contract. It is usually straightforward if the creditworthiness of the new borrower is at least as good as that of the previous borrower.

Debt Interest Deduction: For rented properties, interest expenses can be deducted from taxes as operating expenses.

Debt servicing capacity: A borrower has debt servicing capacity if they can meet the financial obligations of a loan from their current income. This is assessed before granting any loan.

Debtor Swap: When selling a property, the financing can be transferred along with it. The buyer then becomes the debtor of the loan. The Debtor Swap can only be carried out with the approval of the creditor (lender). It is preceded by a thorough credit check. Approval is usually granted for a one-time fee of 1 to 2 % of the remaining loan amount.

Declaration of Division: This is a declaration made by a property owner to the land registry office, stating that a building is divided into separate units. The division becomes effective with the creation of individual land registers for each unit. This allows these co-ownership shares to be independently encumbered. The declaration of division provides information about which specific parts of the building are classified as special ownership, partial ownership, or common property.

Declining Balance Method: As an alternative to straight-line depreciation, the production and acquisition costs for new buildings can also be depreciated on a degressive basis with annually decreasing rates. Due to the initially higher depreciation, the tax-reducing effect is higher in the early years.

Depreciation: The decrease in value of a property can be deducted annually at a certain percentage as a tax loss from rental and leasing income. There are two types of depreciation: linear depreciation (constant annual depreciation amounts) and declining-balance depreciation (decreasing annual depreciation amounts). In the declining-balance method, the tax-reducing effect is higher in the first years due to the initially higher depreciation. While only linear depreciation is possible for existing buildings, for new buildings, there is an option to choose between both depreciation methods.

Development: Development refers to the entirety of necessary activities to prepare a plot of land for construction. This includes connecting the property to water and wastewater supply systems and linking it to the gas, electricity, and telephone networks. Typically, the responsibility for the infrastructure connection lies with the municipality, but the property owner is usually involved in covering the costs.

Development Costs: Development costs refer to the expenses incurred to prepare a plot of land for construction. These costs include connecting the property to sewage systems, public roads, and water and energy supply.

Disagio: The difference between the nominal amount and the actual disbursement of a loan. Disagio represents an upfront interest payment that leads the bank to lower the nominal interest rate. For investors, Disagio can be of interest for tax purposes as it is deductible as advertising expenses.

Disbursement Conditions: Conditions agreed upon in the loan contract that must be fulfilled within a certain period for the bank to disburse the loan (e.g., registration of the mortgage).

Disbursement Rate: Percentage of the loan amount (nominal amount) that is paid out to the borrower.

Discharge Authorization: A discharge authorization is a publicly notarized declaration issued by the creditor (e.g., lender). After the loan has been fully repaid, it grants consent to remove the encumbrance on the property (mortgage or lien). This document is necessary to formally release the property from the mortgage or lien and confirm that the debt has been satisfied.

Division Plan: A building plan certified and signed by the building authority. This plan must clearly show the division of the building and the location and size of the building parts in separate ownership and common ownership. The use units are usually numbered consecutively to avoid confusion and mistakes.

Easements: Easements are rights of third parties on the designated property. They are registered in Section II of the land register. Typical easements include rights of way, rights for utility lines, as well as pedestrian and vehicular rights.

Ecological Building: "With the ""Ecological Building"" program, the Reconstruction Credit Institute promotes all construction projects that meet specific requirements. A property financed with these funds must consume significantly less energy than existing buildings. You can apply for this program through us."

Effective Annual Interest Rate: "The effective annual interest rate represents the cost of a loan, including nearly all price components. The effective interest rate allows for the comparison of different loan offers. The calculation of the effective interest rate is regulated in the Price Indication Ordinance (PAngV). The term ""initial effective annual interest rate"" has been abolished with the Consumer Credit Directive Implementation Act. Under certain conditions, the lender may make certain assumptions for calculating the effective annual interest rate, which can restrict the comparability of the effective interest rate. Your financial advisor will gladly explain this particularity in detail."

Employee Savings Act: "The ""Employee Savings Act,"" is a law that encourages employers to provide their employees with company savings plans or assets forming programs. These savings are publicly subsidized through the employee savings premium, depending on the type of investment."

Employee Savings Allowance: Employees who do not exceed certain income limits can benefit from the employee savings allowance. The contribution to a savings contract must be made by the employer and marked as a company savings plan. After a saving period of seven years, the saver can dispose of their deposited capital and the employee savings allowance. In the case of premature disposal, the already paid allowances are returned to the state.

Employer Loan: A loan granted by an employer to employees for financing residential property. Usually, the employee receives particularly favorable conditions. Under certain conditions, the employee may have to pay taxes on the monetary benefit.

Enforcement: A legally regulated procedure for enforcing private law claims against a debtor. It allows a creditor to collect what they are owed by forcibly selling the debtor's assets or taking other measures to satisfy the debt.

Escrow Account: A Escrow Account is a bank account set up in the name of a notary, where funds from third parties are held in trust. The Escrow Account allows for an early disbursement of a loan if the mortgage has not been registered yet. The notary ensures the proper use of the funds (trust agreement).

Escrow Payment: A Escrow Payment allows a loan to be disbursed before all conditions are met (e.g., registration of the mortgage). The payment is made to a trustworthy third party (the so-called trustee) with the instruction to forward the money to the final recipient when all conditions are met.

EURIBOR: EURIBOR (European Interbank Offered Rate) is the interest rate for Euro-denominated term deposits traded between European banks. It replaced FIBOR (Frankfurt Interbank Offered Rate) as the reference interest rate for loans and interest rates upon the introduction of the Euro.

Expenditure Assistance: Public grants or loans for owners of newly constructed, owner-occupied properties. These are intended to provide relief after moving in according to the provisions of the Second Housing Promotion Act (II. WoBauG) and are paid out in decreasing monthly installments over several years. Specific income and living space limits must be adhered to for the expenditure assistance. Detailed terms, subsidy rates, and distribution criteria can be found in the current housing promotion regulations of the individual federal states.

Exterior Facilities: These include, among other things, supply and disposal lines from the house connection to the property boundary, garden facilities, paving, and path constructions. Part of the costs for exterior facilities belongs to the production costs.

External Capital: External capital refers to all financing funds provided to the borrower by third parties (banks, insurance companies, employers, public institutions, or family/friends).

Financial Plan: Financial plan is a detailed breakdown of the construction and acquisition costs on one hand, and the equity and borrowed funds to be used for financing on the other hand. The financing requirement is derived from the difference between the total costs and the equity. Based on this, a repayment plan can be created for the borrower, listing the interest and repayment obligations and the monthly burden.

Fire Insurance: Fire insurance covers damages to buildings caused by fire, lightning, or explosion. In the event of a claim, it should cover the total costs of rebuilding the property (replacement value insurance). Proof of existing fire insurance is a basic requirement for financing a property.

Fixed Interest Rate: Fixed Interest Rate refers to the interest rate that remains fixed for a specific period in mortgage loans. During this time, the loan cannot be terminated. Only with a fixed interest rate period of more than ten years can the loan be terminated with a six-month notice period.

Fixed Interest Rate: The fixed interest rate means that the interest rate is bound and remains unchanged during the specified period.

Fixed Loan: FixedLoan is a long-term loan that is repaid in a lump sum at the end of the fixed interest rate period. During the fixed interest rate period, only the interest is paid. The loan is often paired with savings products such as building society contracts, capital life insurance, pension insurance, or investment funds for repayment.

Fixed-Rate Loan: Fixed-Rate Loan is a loan with terms guaranteed by the bank for a predetermined period, regardless of whether interest rates rise or fall. The opposite of a fixed-rate loan is a variable interest rate loan, where the conditions change based on the prevailing market interest rate at any given time.

Follow-up Financing: In a follow-up financing, an existing loan is replaced by a new one. If the new loan is taken out with the same bank, it is also called a prolongation. Refinancing is done when the borrower switches to a different bank.

Forward Loan: "A Forward Loans is a loan with which a borrower secures an interest rate for a loan in the future. The prerequisite for taking out a Forward Loans is the existence of a property that can serve as collateral. This type of loan is often used when the fixed interest period of an existing loan will expire in twelve to 60 months, but the borrower wants to secure the current interest rate. Forward Loans come with interest rate premiums depending on the duration of the ""waiting period."" There are no loan commitment fees (Bereitstellungszinsen) associated with Forward Loans."

Forward Loan: A forward loan is a mortgage loan with a short fixed interest rate period (approximately two years) that can be terminated by the borrower at any time to enter into a longer-term contract, for example, when interest rates have declined. Therefore, they are particularly suitable for bridging high-interest rate periods. However, they are also more expensive than regular loans with a fixed interest rate.

Fractional Ownership: Fractional Ownership refers to the special ownership of non-residential areas within a building (e.g., cellars or gardens). It is always associated with a share of co-ownership in the common property.

General Loan Conditions: Pre-formulated contract terms and conditions that apply to all customers in loan transactions. By signing the loan agreement, the general loan conditions are accepted, similar to general terms and conditions.

Global encumbrance: Global encumbrance occurs when a mortgage encumbers several properties. In this case, each property is liable for the total amount of the mortgage. The mortgage creditors protect themselves against possible insolvency of the borrower because they can realize any or all of the properties to satisfy their claims.

Ground Rent: "Recurring payment for the use of an ""Erbbaurecht"" (land lease). It is paid to the landowner and must be determined according to time and amount for the entire term, as specified in § 9 Abs. 2 of the Erbbaurecht Regulation (ErbbauRVO)."

Guarantee: A guarantee is a contract between the guarantor and the creditor of a third party. The guarantor undertakes to be liable to the creditor for the fulfillment of the obligations in case the third party (debtor) fails to pay - the guarantor is liable with their entire assets (self-guaranteeing guarantee).

Home Loan: Home loans are synonymous with consumer loans. These loans, ranging from 5,000 to 50,000 euros, are granted at a fixed interest rate for a period of up to ten years. Although no mortgage on a property is required for these loans, they are specifically offered to homeowners.

Home Owner Allowance: "This state subsidy was abolished as of January 1, 2006. However, borrowers who had concluded the purchase contract for their property or submitted the building application before this date were able to secure the entire subsidy. The ""Home Owner Allowance"" consisted of the basic subsidy amount (up to 1,250 euros) and the child building allowance (800 euros per child). It was linked to certain income limits and was granted for a period of eight years. The disbursement was made by the responsible tax office on March 15 of each year."

Homeowner's Liability Insurance: As the owner of a property, you are obliged to maintain your property in a safe condition for other people. However, if people or property are still damaged, you must provide compensation. You can protect yourself against this risk with a liability insurance policy called homeowner's liability insurance.

Housing Allowance: The housing allowance is a government reward for contributions made to a building society savings contract. Individuals over the age of 16, who are not subject to unlimited taxation and do not exceed certain income limits, can benefit from this allowance. After a savings period of seven years, the allowance is paid out when the building society savings contract is allocated.

Housing Construction Support: Landlords benefit from tax advantages (depreciation and deductions of expenses). Additionally, there are usually low-interest loans (expenditure loans), ongoing subsidies (expenditure subsidies), and guarantees provided by the states for housing construction. Reconstruction Credit Institute loans are also subsidized by the government, making them more affordable. However, most of these incentives are subject to specific income limits, family sizes, and construction requirements. For more information, you can contact the local housing authorities or the mayor's office.

Income Value: Income value is particularly relevant for calculating the mortgage value of rented multi-family houses. The calculation is based on the income generated from rents and leases, minus operating costs, projected over the remaining useful life of the property.

Increased Depreciations: Increased depreciations refer to the tax benefits provided for certain modernization and maintenance measures on rented buildings that fall under specific categories as per § 7i EStG (Income Tax Act). These categories include buildings that are subject to monument protection or located in redevelopment areas and urban development areas as per § 7h EStG. Property owners can apply for increased depreciations, allowing them to deduct up to 10% of the eligible costs over a period of ten years.

Inspection of Land Register: With legitimate interest, the land register can be viewed at the land registry office. Buyers and property owners always have a legitimate interest and can request a land register extract at any time.

Installment Loan: Installment loans are a synonymous term for consumer loans. These loans, ranging from 5,000 to 50,000 euros, are agreed upon at a fixed interest rate for a term of up to ten years. As these loans do not require a mortgage on a property, they are particularly suitable for tenants and property owners with existing mortgage burdens.

Instant Credit: Instant Credit is a synonymous term for consumer loans. These loans, ranging from 5,000 to 50,000 Euros, are agreed upon at a fixed interest rate for a duration of up to ten years. As no collateral on a property (such as a mortgage) is required for these loans, they are particularly suitable for tenants and property owners with already existing mortgage burdens.

Interest: Interest is the fee paid by the borrower to the lender for the provision of a loan. Typically, it is expressed as a percentage of the nominal amount of the loan, known as the nominal interest rate.

Interest Expenses: Compensation for the provision of financing funds. Interest Expenses can only be tax-deductible as operating expenses for rented properties. It does not matter whether the financing costs were incurred before or after the tenant moved in.

Interest Rate Risk: In the case of a variable interest rate loan, there is a risk of interest rate changes because the interest rate can adjust to market rates during the loan term and may also increase. However, this interest rate risk is often rewarded with initially favorable starting conditions.

Interest Withholding Tax: According to the Interest Withholding Tax Act, as of January 1, 1993, all interest income is subject to a 30% withholding tax. This amount is deducted by financial institutions from the interest and directly transferred to the tax authorities. This withholding can be avoided if the interest beneficiary issues a tax exemption order to the financial institution. However, interest earned on building society savings deposits is exempt from the withholding tax even without a tax exemption order if the saver receives employee savings allowance or home ownership premium for the contributions made to the building society during the calendar year.

Interim Financing: Interim financing is used to bridge a short-term credit requirement (e.g., during the construction phase). It is later replaced by equity (e.g., from the sale of another property) or the disbursement of long-term financing funds.

Investor Financing: When a property is acquired not for private use but as an investment, it requires a different approach to financing. Different valuation methods are used, and the terms and conditions for an investor financing typically differ slightly from those of a private construction financing. The focus is on the potential return on investment and the financial viability of the investment property rather than the personal use of the property by the buyer.

Joint and Several Debtors: When multiple borrowers are jointly liable for a loan, it is referred to as joint and several liability. Each co-debtor is individually obligated to pay in full, independent of the others. The bank is free to choose which co-debtor it claims the payment from but can only demand payment once.

Kredit Institute for Reconstruction: "The federal-owned Kreditanstalt für Wiederaufbau (KfW) provides low-interest loans aimed at promoting private residential construction, ecological building, and supporting the economy. The KfW does not directly grant its funds, they must be applied for through an intermediary institute. This can also be done as part of a financing inquiry with us."

Land Charge: Land charge is usually registered in the land register in favor of a creditor. This secures the creditor's claims against the property owner. The land charge is therefore a lien on a property. It is abstract, which means that it can be listed in the land register even without the existence of a specific claim.

Land Lease: An land lease is typically limited in time (often 99 years) and allows a builder to construct and use a house without having to purchase the land itself. Instead, the builder pays a predetermined ground rent to the owner of the land for the entire duration of use.

Land Register: Land register is a register maintained by the local court (Amtsgericht) that documents the legal relationships of a property. It provides information about the size, use, and ownership of the property. Additionally, it contains a list of rights on other properties as well as encumbrances and restrictions. Anyone with a legitimate interest (e.g., buyers) can view the land register. It enjoys public faith, meaning that the information provided can be trusted.

Land Register Extract: Land register extract is a complete copy of all existing land register entries for a property. It can be requested from the relevant land registry office by anyone with a legitimate interest.

Land Registry Office: Land registry office is the department of the local court where the land registers and land files are maintained. For land register extracts and insights into the land register, one must contact the land registry office.

Land Value: The value of the land, which depends on its size, location, layout, condition, and degree of development. The value is calculated using the following formula: Square meter price (including development costs, but excluding land acquisition costs) x plot size

Land with Development Expectation: When an area is not yet designated as building land but there is already an intention to convert it into building land, it is referred to as land with development expectation. However, the final usage determination must be set bindingly through a development plan.

Leasehold: """Leasehold"" is another word for the term land lease. Such a right is usually limited in time (often 99 years) and allows a builder to construct and use a house without having to purchase the land itself. In return, the builder pays a predetermined ground rent to the owner of the land for the entire period of use."

Legitimation: Every loan applicant must identify themselves by presenting a valid identity card or passport. Often, due to the geographical distance from the credit institution, the necessary documents cannot be presented in person. In such cases, Deutsche Post AG often handles the identification process through the PostIdent procedure.

Living Area: The calculation of the living area is an important component in every building application and financing request. The living area includes: 100% of the floor area of rooms with a height of at least 2 meters, 50% of the floor area of rooms with a height between 1 and 2 meters, as well as fully enclosed rooms (e.g., conservatories), a maximum of 50% of the floor area of balconies, loggias, and rooftop gardens if they exclusively belong to the living space. Not included in the living area are: basement areas, undeveloped attics, laundry rooms, drying rooms, boiler rooms, storage rooms located outside the apartment, sheds, and garages.

Loan Approval: A legally binding approval from a lender regarding the granting of a loan.

Loan Balance Insurance: A Loan Balance Insurance is a way for the borrower to secure their loan payments against death, accident, or illness. In the event of the borrower's death, the outstanding loan balance is typically covered by the insurance company. Additionally, additional services such as accident or health insurance may be offered. Loan Balance Insurance is mandatory for loan approval in many building societies.

Loan phase: The loan phase follows the savings phase of a building society savings contract and begins with the disbursement of the loan. A separate loan agreement must be concluded for this purpose. Subsequently, the borrower pays his loan installment to the building society every month. This installment consists of an interest and a repayment component. The loan is thus repaid in annuities.

Loan Redemption: Repayment of an existing loan by a new loan from a different lender.

Loan-to-Value Appraisal: The valuation determined by the respective financing institution below the market value of a property. The loan-to-value appraisal usually corresponds to the value that can be obtained under normal circumstances in a later sale. Loan-to-Value Ratio (LTV) = Market Value - Safety Margin

Loan-to-Value Limit: Credit institutions are only allowed to lend up to a certain limit against the value of a property. This means that only a certain portion of the property can serve as collateral for the loan. The limit is determined by the relevant legal and statutory provisions for each institution.

Loan-to-Value Ratio: The percentage of the property value that is financed with a loan, also known as the loan-to-value (LTV) ratio. The loan-to-value ratio is based on the appraised value of the property, not on the purchase price. For example, if a property costs 300,000 euros and has an appraised value of 270,000 euros (with a safety margin of 10%), and a loan of 150,000 euros is taken, then the loan-to-value ratio is 56%.

Maintenance costs: Maintenance costs are the expenses incurred for the elimination of normal wear and tear on properties. This includes regular cosmetic repairs, maintenance of the heating system, and similar measures necessary to keep the property in good condition. Maintenance costs can be claimed as tax-deductible expenses (advertising costs) if the property is rented out or generates other forms of income.

Maintenance Effort: According to the Income Tax Act (EStG), all expenses incurred for the maintenance and renovation of a property can be tax-deductible as maintenance expenses. Maintenance measures on rented buildings can be deducted as advertising costs in the year of payment of the invoice from the income from rental and leasing. If the modernization work goes beyond a contemporary, substance-preserving renewal of the property and even increases its utility value, it falls under production costs.

Maintenance Reserve: Maintenance reserve or sinking fund is a regularly paid lump sum required by the German Condominium Act (§ 21 Abs. 5 WEG) to cover the costs of eliminating damages and defects in the jointly-owned property (common property). The amount is determined based on the living area of each individual condominium owner and is typically between 0.8% and 1.0% of the construction costs per year. The purpose of the Instandhaltungsrücklage is to ensure that sufficient funds are available for ongoing maintenance and repair of the property without the need for special assessments or additional contributions from the owners in case of unexpected expenses.

Manufacturing Costs: These are expenses incurred in the construction of a usable building. This includes construction costs, architect fees, costs for outdoor facilities, and fees for building permits.

Market Value: The market value of a property corresponds to the price that could be achieved in the ordinary course of business at a specific point in time.

Modernization: Modernization refers to the process of increasing the residential or functional value of an existing building and adapting it to meet the requirements of healthy living and working conditions. This can be achieved through changes to the layout or the renewal of the interior and facilities. Modernization leads to a sustainable increase in utility value or long-term improvement of the overall living conditions.

Money Procurement Costs: Money procurement costs are expenses incurred in connection with obtaining financing. This includes processing fees, broker commissions, appraisal costs, notary and land registry fees for the registration of the mortgage, etc. Costs charged by the bank are often deducted directly from the loan amount disbursed.

Mortgage: "With a mortgage, creditors can secure their claims against the property owner through the property itself. Unlike a ""Grundschuld,"" a mortgage depends on the underlying claim. Once the personal claim is paid off, the mortgage also ceases to exist. Nowadays, mortgages have largely been replaced by reduction of costs and administrative effort."

Mortgage Banks: Mortgage banks main task is to provide medium- and long-term loans secured by mortgages and municipal loans. They finance their operations by issuing mortgage bonds and municipal bonds. Mortgage banks are subject to special legal regulations.

Mortgage Creation: With the mortgage creation, a property owner agrees to encumber their property. This agreement must be notarized and is associated with the application for entry in the land register.

Mortgage Interest: "Mortgage interest is entered in the land register together with the mortgage. While the amount of the mortgage usually corresponds to the net loan amount, the ""Grundschuldzins"" differs significantly from the loan interest rate. This allows the creditor to cover additional claims (outstanding interest payments, costs for forced auction, etc.) in case of foreclosure."

Mortgage lien: Mortgage lien, a creditor secures their claims against the property owner. For example, a mortgage or a land charge can be entered for this purpose.

Mortgage Loan: A long-term loan secured by a mortgage. To protect the borrower against short-term interest fluctuations, the agreed-upon interest rate is fixed for several years.

Municipal Bond: A fixed-interest security issued by a financial institution, which is secured by a claim against cities and municipalities.

Muscle mortgage: Muscle mortgage is a colloquial term for self-help or personal contribution in a construction or renovation project. It refers to the personal labor and effort (self-help, help from relatives, and neighbors) provided by individuals to save on hiring professional labor. The value of the muscle mortgage is often overestimated. There are risks involved, including the significant amount of time required, longer construction period, potential lack of professional qualifications, and the exclusion of warranty claims.

Negative Certificate: Municipalities generally have a right of first refusal (pre-emption right) for all properties, which does not require entry in the land register. By issuing a negative certificate, the municipality confirms that it will not exercise this right.

Negative Decision: The office responsible for settling open property issues certifies hereby that no property claims are being made on the property. This decision is usually required before the establishment of a mortgage.

Negative Pledge: A possible security measure for financing with a relatively low loan amount (e.g., 10,000 euros). Through a negative pledge, the borrower commits not to change his assets to the detriment of the lender. This could, for example, involve the sale or encumbrance of his real estate. The negative pledge is used instead of a mortgage entry.

Nominal Interest Rate: The nominal interest rate is the fixed or variable periodic percentage applied annually to the loan amount taken - prior to the implementation of the Consumer Credit Directive, the Sollzinssatz was referred to as the Nominalzinssatz (nominal interest rate).

Notarized Purchase Price: The Notarized Purchase Price refers to the purchase price that forms the basis of a purchase contract concluded before a notary. The notarieller Kaufpreis is relevant for various purposes, including tax depreciation, real estate transfer tax, and the determination of the mortgage lending value.

Object Constraint: The Object Constraint refers to the restriction on claiming the state subsidy for the construction or purchase of real estate according to § 10e of the Income Tax Act (EStG). This subsidy can only be claimed for one property and can therefore only be used once in a lifetime. Married couples can each claim the subsidy for two properties.

Obligation to Explain: Obligation to explain mandates that the lender and loan broker are required to provide the consumer with appropriate explanations regarding the contract content before concluding the agreement. This ensures that the consumer is fully informed about the terms and conditions of the loan.

Open Real Estate Funds: In open real estate funds, the investor acquires direct collective ownership of multiple properties and benefits from the expertise of experienced managers who are entrusted with the acquisition and management of profitable assets. Financial institutions can issue an unlimited number of property certificates, and the quantity and price of the circulating shares may constantly change depending on supply and demand.

Operating Costs: Costs for the ongoing operation and maintenance of a property, e.g. heating costs, property tax, fire insurance, and liability premiums, repairs.

Operating Costs: Expenditures for the ongoing operation and maintenance of a property. For rented properties, there are two different types of operating costs: recoverable operating costs, which can be billed to the tenant (e.g., waste disposal, street cleaning, etc.), and non-recoverable operating costs, which the landlord must bear alone (e.g., property management costs, maintenance reserves).

Own Assets: Own assets used for real estate financing. Equity capital includes cash, bank and savings deposits, securities, unencumbered own land, building society savings, and personal contributions.

Parcel: Parcel refers to a specific plot of land that allows for its precise identification. A property can consist of one or multiple parcels.

Partial Disbursement Surcharge: This is a compensation for the additional effort of a credit institution when the loan is paid out in several installments (e.g., based on construction progress) at the customer's request. The surcharge varies depending on the bank: while some institutions do not charge anything, others may charge between 50 to 100 euros.

Payment Method: This refers to the agreed-upon payment schedule for the loan installments. For monthly installment payments, it can be either: in advance at the beginning of the month, in the middle of the month, or at the end of the month.

Personal Labor: "Personal labor (self-help, assistance from relatives and neighbors) provided to save on craftsman labor costs. The extent of self-help is often overestimated. Risks include the high time investment, longer construction period, sometimes insufficient technical qualifications, and exclusion of warranty claims. Self-help is often also referred to as ""Muscle Mortgage."""

Personal Loan: A personal loan is a credit secured by the borrower's personal creditworthiness. Before granting a personal loan, the borrower's income, financial situation, and ability to service the debt are assessed. The loan-to-value ratio is typically limited to 80% of the appraised value, taking into account any prior encumbrances.

Plot ratio: Plot ratio is the ratio of the building's floor area to the size of the plot, as specified in the development plan. For example, with a plot ratio of 0.4, 40% of the plot can be built on, taking into account the floor areas of garages and parking spaces as well as their access routes.

Pre-contractual information: Pre-contractual information refers to the information that must be provided to a consumer before entering into a contract. This information is intended to inform the consumer about the essential terms and conditions of the contract, such as the main features of the product or service, the total price, any additional costs, and the right of withdrawal. It is a legal requirement to ensure transparency and consumer protection in various types of contracts, including loan agreements and consumer contracts.

Pre-emption Note: Secures the contractual claim to the transfer of ownership of a property. The pre-emption note is entered in Section II of the land register. It protects the future owner from the seller selling the property to another person and/or burdening it with additional encumbrances and restrictions.

Pre-Financing Loan: A pre-financing loan is available to individuals who have a building society contract but require financial resources for their property financing before the total amount of the building society contract is allocated. Once the allocation is made, this pre-financing loan is automatically replaced by the building society contract amount. In contrast to interim financing, the minimum savings balance required for allocation is not yet accumulated with the pre-financing loan.

Prefabricated House: Prefabricated house is a building constructed from pre-manufactured components in either solid or timber construction. They are typically delivered turnkey to the buyer, although partial self-construction is also possible, where some of the finishing work is undertaken by the buyer. These houses are commonly financed by banks.

Prepayment Compensation: When promised loans or even partial amounts are not accepted by a borrower, the credit institution incurs a loss. The borrower must compensate for this loss through a prepayment compensation, also known as a non-acceptance fee.

Prepayment Penalty: Lenders usually demand a prepayment penalty when a borrower wants to repay their loan prematurely. In mortgage financing, the interest rates are fixed for a certain period, and the lenders need to obtain funds for that time. If the loan is repaid early, the lender incurs a loss, for which the borrower must compensate.

Price Indication Regulation: The Price Indication Regulation is a regulation aimed at consumer protection. According to the Price Indication Regulation, financial institutions are obligated to list all relevant costs, prices, and effective interest rates in offers and loan agreements to ensure better comparability for consumers.

Prolongation: Prolongation refers to the extension of an existing loan. Unlike refinancing, in which the entire loan is replaced by a new one from a different lender, a prolongation involves only the adjustment of the interest rates. The loan provider (bank) remains the same in a prolongation.

Promotion of home ownership: To increase the rate of homeownership in Germany, state-sponsored promotions were established to facilitate property financing. This was made possible through the provision of public funds, guarantees, or grants. Additionally, certain costs incurred during construction could be claimed for tax deductions. However, state support was reduced with the abolishment of the homeownership allowance on January 1, 2006, among other changes.

Property: A spatially precisely delimited part of the Earth's surface that is entered in the inventory of a land register sheet. The buildings firmly attached to the land are essential components of the property.

Property Developer: A property developer acquires land in their own name and at their own expense. The company then constructs buildings on these properties and sells them after completion.

Property Developer Model: A concept in which properties that are still in the planning or construction phase are purchased. This allows for the utilization of tax incentives.

Property Tax: Property tax is a tax on real estate levied by the municipalities. It is collected according to uniform principles. The amount depends mainly on the respective property value and the local tax rate of the municipalities.

Purchase Agreement: The purchase of a property must be done through a notarized contract, as the transaction would not be legally valid otherwise. In this process, the conditions for the transfer of ownership are also clarified. The seller commits to transferring the ownership, and the buyer commits to paying the agreed-upon purchase price. The three steps to acquiring a property are as follows: Notarial conclusion of the purchase contract, Notarial declaration of agreement between the seller and the buyer regarding the transfer of ownership, Registration of the transfer of ownership in the land register. Only with the entry in the land register does the buyer actually become the owner of the property.

Ranking Position: Creditors of a borrower are listed in a specific order in the land register. The respective ranking position is important in case of foreclosure: the better the placement, the higher the chance that the outstanding claims can be satisfied, as the claims are served in sequence.

Real estate: General term for undeveloped or developed properties of all kinds, including the buildings erected on them.

Real Estate Agent and Property Developer Regulation: The Real Estate Agent and Property Developer Regulation (Makler- und Bauträgerverordnung or MaBV) governs the obligations of real estate agents, loan brokers, and property developers who require a permit to operate their business according to § 34c of the Trade, Commerce, and Industry Regulation Act (Gewerbeordnung or GewO).

Real Estate Credit Institution: The main task of real estate credit institutions is to grant predominantly medium and long-term loans secured by mortgages and municipal loans. They finance their operations by issuing mortgage bonds and municipal bonds. Real estate credit institutions (also known as mortgage banks) are subject to special legal regulations.

Real estate financing: Most people need real estate financing when they want to buy a house or an apartment. For this, they take out a loan from a bank and pay it back over a period of several years or decades. If a borrower applies for their real estate financing through us, they don't have to inquire at banks themselves and compare different offers, but instead, they receive a real estate financing tailored to them individually without much effort.

Real Estate Funds: Funds for financing specific construction projects. Distinctions can be made between open-end and closed-end real estate funds. Real estate funds are subject to the law governing investment management companies.

Real Estate Loan: A real estate loan is a long-term loan typically secured by the registration of mortgages in the land register and is often used for investment purposes. Real estate loans from banks are generally registered in the first rank in the land register, while loans from building societies (savings and loan associations) are registered in the second rank.

Real Estate Transfer Tax: The real estate transfer tax is a tax burden when buying developed and undeveloped properties. This tax can range between 3.5% to 5% of the purchase price. The local tax office provides information about the exact amount.

Reconstruction Credit Institute: "This federal institution provides low-interest loans aimed at promoting private home construction and eco-friendly building as well as supporting the economy. The Reconstruction Credit Institute does not directly grant funds, they must be applied for through an intermediary institute. This can also be done as part of a financing inquiry with us."

Reconstruction Credit Institute Home Ownership Program: The Reconstruction Credit Institute Home Ownership Program, offered by the Reconstruction Credit Institute, is suitable for anyone looking to acquire a property for personal use. You can apply for this program through us.

Redemption-free Years: An agreement between the financial institution and the borrower that the repayment of the loan debt will begin only after a certain period following the disbursement of the loan.

Refinancing: Refinancing refers to the process of obtaining additional financing beyond the originally agreed net loan amount. It may become necessary when the planned costs for a construction project exceed the initial budget during the construction phase, and as a result, additional funds need to be borrowed.

Refinancing: Refinancing is the process of raising funds by a financial institution in order to provide loans. In the case of mortgage banks, this is done through the issuance of mortgage bonds. The bank issues these bonds to investors and uses the funds obtained to provide loans to borrowers. The mortgage bonds are secured by the assets of the bank, usually a pool of mortgage loans, which provides additional security to the investors. Refinancing helps the bank maintain a continuous flow of funds to meet its lending activities.

Renovate Living Space: "The ""Renovate Living Space"" program was launched by the Reconstruction Loan Corporation (KfW) to promote renovations or modernizations of residential properties through favorable loan conditions. If the measures taken lead to a reduction in energy consumption, borrowers can also benefit from a better interest rate. You can apply for this program through us."

Renovation: Renovation is the process of maintaining or restoring a property to its original condition. It is differentiated from modernization, which aims to increase the utility value or significantly improve the living conditions of the property.

Rental and lease income: One of the seven types of income specified in the German Income Tax Act (§ 21 EStG). These earnings include all taxable surpluses or losses from the rental or leasing of undeveloped or developed property. Deductible expenses include costs for modernization, repairs, insurance, property tax, as well as water and chimney sweep expenses. In addition, loan interest and depreciation (AfA) can be claimed for tax purposes.

Repayment: Regular payments made to repay a loan. The amount of the repayment determines the size of the loan installment and the total duration of the loan.

Repayment Rate: In annuity loans, this is the initial amortization rate expressed as a percentage of the loan amount. In loans with agreed end-of-term repayment, it refers to the amount of the savings rate.

Repayment Suspension: Borrowers can agree to a repayment suspension instead of the usual monthly loan repayments. In this case, they only pay the accrued interest (fixed-rate loan). As a replacement for repayment, both parties agree on a so-called repayment surrogate. This surrogate is saved separately and used to repay the loan at the end of the term. Examples of such surrogates are: assignment of claims from life insurance policies, annuity insurance policies, building society contracts, or investment funds.

Replacement for Amortization: When a repayment suspension is agreed upon, the loan usually has to be repaid in a lump sum at the end of the term. Therefore, the borrower must save a replacement for amortization. Options for such surrogates include capital life insurance, pension insurance, building society contracts, or investment funds.

Resale Right Annotation: A resale right annotation is entered in the land register and secures the seller's claims for the re-transfer of a property. The entry of such a note often occurs in connection with the development of properties sold by cities and municipalities. The purchase of the property is subject to certain conditions. If the buyer fails to meet these conditions, the previous owner (in this case, the city) has a right to reclaim the property.

Rescheduling: Rescheduling refers to the process of changing the lender for a follow-up financing. After the expiration of the fixed interest rate period, this is completely unproblematic and cost-effective. However, during the fixed interest rate period, the prepayment penalty could negate the intended interest savings.

Residential Purposes: The granting of building loan contracts is only allowed if the funds are used for residential purposes. Residential purposes include the construction, purchase, or modernization of real estate. Additionally, the building loan contract allows the borrower to acquire building land or land leasehold rights or secure rights to permanent use of residential space (e.g., in a senior citizens' home). It can also be used to refinance an existing mortgage.

Residual Debt: Residual Debt refers to the outstanding (unpaid) portion of a loan at a specific point in time. The amount of the remaining debt can be determined based on an amortization schedule.

Right of First Refusal: A right of first refusal is recorded in the land register in Section II. It grants the beneficiary the right, in the event of a sale to a third party, to acquire the property under the conditions negotiated between the seller and the third party. If the beneficiary does not wish to exercise this right, they must give their consent to the sale.

Right of Residence: A right granted to a third party to use a property without restrictions, to the exclusion of the owner. The right of residence may also be limited to a part of the building. The beneficiary is authorized to accommodate other people in the dwelling. The costs of maintaining the property, such as taxes, public charges, repairs, etc., are borne by the owner.

Right of Way: A right of way is the legal right to cross or pass through another person's property. The potential impact on the value of the property due to this right should be individually assessed.

Risk Life Insurance: A risk life insurance is a pure death insurance policy that is often taken as additional security for mortgage loans. It covers the death risk of the borrower and provides financial security for the beneficiaries in case of the borrower's death.

Savings Phase: During the savings phase of a building society savings contract, the saver can make monthly fixed contributions to the contract or make larger irregular payments at intervals. The saver can also contribute the entire minimum savings amount in a lump sum.

Schufa: A German private credit bureau. Schufa receives information from the institutions affiliated with it to assess the creditworthiness of borrowers. This information is provided to banks upon request - naturally, with strict adherence to data protection.

Secondary Suite: "An ""Secondary Suite"" can be referred to as a self-contained apartment within a single-family house with a living area of at least 25 square meters, including its own kitchen and sanitary facilities."

Selection Appointment: During a selection appointment, buyers of a prefabricated house or a property from a property developer have to decide on the equipment and finishes of their property. Tiles, entrance door, roof tiles, or doorknobs - every detail is determined during a selection appointment. Only after this appointment is the actual purchase price determined, as special requests deviating from the standard equipment can increase the price.

Self-Exploiting: "When the borrower uses the property for personal residence, it is referred to as ""self-exploiting"". This type of use may be required for certain loan forms or special agreements."

Shell House: A house that is partially constructed by a building company from prefabricated parts up to a certain degree. Unlike a turnkey prefabricated house, a shell house is not delivered ready for occupancy but is completed by the property owner through self-effort.

Special Property: The Condominium Act distinguishes between two types of special property: Firstly, the Sondereigentum in a specific apartment (Wohnungseigentum), and secondly, the Sondereigentum in non-residential rooms not intended for residential purposes.

Special Repayment: In addition to the regular monthly loan repayment, borrowers can also make extra repayments to reduce their debt. These extra repayments, known as special repayment, can shorten the overall loan term or reduce the regular loan installments.

Special Usage Rights: In multi-family houses, special usage rights are often granted for parts of the common property. This is the case, for example, when parking spaces are reserved for specific apartment owners. Special usage rights are also granted for garden areas and cellar spaces.

State Subsidies: The largest block of state subsidies - the homeownership subsidy (Eigenheimzulage) - was abolished on January 1, 2006. However, home builders can still access low-interest loans through KfW loans. Landlords, on the other hand, benefit from tax advantages such as depreciation. Additionally, the federal states offer low-interest loans, ongoing grants, and guarantees for housing construction. For more information, you can contact the local housing authorities or the municipal office.

Straight-line depreciation: In contrast to declining balance depreciation, where the depreciation rate decreases over time, the costs of construction or acquisition can also be depreciated using straight-line depreciation. In this method, the annual depreciation amounts remain constant over the entire useful life of the asset. This means that the annual depreciation is uniform, and the tax-saving effect remains constant throughout the depreciation period. Unlike declining balance depreciation, where the depreciation rate decreases each year, straight-line depreciation is often used to systematically reduce the book values of assets over their useful life and reflect the actual decrease in value.

Subordination Agreement: Through a notarized certified declaration, a creditor who is already registered in the land register can change their previous ranking position in favor of another previously subordinate creditor.

Term/Duration: The term or duration of a loan refers to the period from the disbursement of the loan until it is fully repaid. The term is dependent on the repayment rate and the nominal interest rate. The term is often confused with the fixed interest rate period. Unlike the term, the fixed interest rate period only describes the period for which the interest rates are fixed.

Transfer of Ownership: "Agreement between the seller and the buyer regarding the transfer of ownership of the property or real estate (§ 925 BGB - German Civil Code). The transfer of ownership is only completed through the ""Auflassung"" and the registration of the change of ownership in the land register."

Usufruct: Usufruct is an encumbrance on a property in Section II of the land register in favor of a specific person. This person is entitled to derive benefits from the property. Examples include rights of residence or claims to rental income from the specified property. Usufruct usually renders a property unmarketable.

Valuation (or Property Appraisal): Valuation is the process of determining the actual market value and mortgage value of a property. For condominiums and single-family houses, the evaluation is usually done using the cost approach (Sachwertverfahren). The property's cost-based value is composed of the land value (size of the land multiplied by the land value per square meter) and the building value (cubic meters of enclosed space multiplied by construction costs or total living area multiplied by the average price per square meter of living area). For multifamily houses, the value is determined using the income approach (Ertragswertverfahren), which is based on the property's annual net cold rent.

Variable Interest Loan: Variable interest loan is a loan with terms that the bank can change at any time based on market interest rate developments. This interest rate risk is often rewarded with more favorable initial conditions.

Variable interest rate: The nominal interest rate that can be changed unilaterally by the lender during the term of the loan, meaning it is variable. The interest rates are not fixed for a specific period of time. Often, the adjustment is linked to an index (e.g. EURIBOR).

Variable loan: In a variable loan, the interest rate is adjusted to the market interest rate every three or six months. The loan can be fully or partially repaid on these dates.

Water Damage Liability Insurance: If you own an oil tank, you are liable for all damages and their consequences that occur in the event of a spill, with unlimited liability. With a water damage liability insurance, you can protect yourself against this risk.

Withdrawal from the Loan Agreement: Unilateral termination of a not yet disbursed loan agreement by the lender. The institution will withdraw from the contract if, for example, information becomes known subsequently that no longer justifies the disbursement. False information in the loan application also entitles the lender to withdraw and demand a so-called non-acceptance compensation.

Year of Construction: The year of construction of a building is the year of its completion and readiness for occupancy. If buildings become unusable due to damage and are later restored, the year of the original completion is considered the year of construction. In the case of completely destroyed buildings, the year of reconstruction is considered the year of construction.

Zoning Plan: In a zoning plan, the permissible types of land use are legally determined. This means that all essential information regarding the future design of the area can be found in it. It includes, for example, the type of construction, the areas of the land that can be built upon and those that cannot, the building limits, the number of floors, and the minimum size of building plots.

Building Glossary

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