Buying with little or no equity

🏦What 'equity' means to a German lender

Two different things get called equity and they behave differently. The purchase costs — transfer tax, notary, land registry, commission — are money that vanishes on the day; no lender secures against them. Equity in the property is the share of the price you fund yourself, which reduces the bank's exposure.

So the ladder runs: paying costs plus 20 % of the price is comfortable, paying costs plus nothing is what lenders call 100 % financing, and having the loan cover the costs as well is 110 % financing. Each rung up is a different product at a different price.

🏦100 % financing: the price of the price

Here the loan covers the full purchase price and you pay only the costs from savings. Plenty of lenders do this. The interest rate is higher than a 20 % deposit would earn you — typically several tenths of a percentage point — because the loan-to-value ratio drives the bank's pricing directly.

On a €350,000 loan over a ten-year fix, half a percentage point is roughly €1,750 a year. Worth knowing before deciding that saving another two years is not worth it.

🏦110 % financing: rare, and reserved

This means the loan covers the price and the purchase costs. A minority of lenders offer it, and the criteria are strict: a secure permanent income well above average, spotless SCHUFA, past probation, and often a property in a location the bank considers liquid.

For foreign applicants on a temporary permit, this route is realistically closed at most banks. Not because of the permit alone, but because the two risk factors stack.

💶Who actually gets approved with little equity

The pattern is consistent. Permanent employment past probation, in a sector the bank reads as stable. Income comfortably above the household's outgoings, so the affordability calculation has visible headroom. Clean SCHUFA with no consumer loans running. A property that is straightforward to value and easy to resell — a flat in a city, not a converted farmhouse.

Two solid incomes on a joint application help more than almost anything else, because the bank's stress test has two sources to fall back on.

📌Alternatives worth checking before you stretch

A family loan, properly documented, counts as equity at most banks if it is genuinely subordinated and not repayable on demand. A KfW loan — the state development bank — can supply part of the financing on favourable terms; the KfW 124 home ownership programme provides up to €100,000 for owner-occupied property with no income limit, and families building or buying may qualify for larger programmes. A Bausparvertrag already running may be allocatable sooner than you think.

And occasionally the answer is a cheaper property. A €300,000 flat with 10 % down is a stronger file than a €400,000 flat with nothing, and the monthly payment is lower on both counts.

⚠️The risk nobody mentions in the brochure

With little equity you are exposed if you have to sell early. Prices do not only rise, and selling a property worth less than the outstanding loan means finding the difference in cash — on top of the purchase costs you already paid and will not recover.

This is not an argument against buying with a small deposit. It is an argument for buying somewhere you expect to stay for a decade, which is roughly the horizon over which the purchase costs are absorbed anyway.

🏦How the rate moves with the loan-to-value ratio

Lenders price in bands. The exact numbers change with the market, but the shape is constant: the less of the price you cover yourself, the more each borrowed euro costs.

Note the shape of it: the step from 20 % down to 10 % down is small. The step from 10 % to nothing is not. If you are close to a band, finding the last few thousand euros is often worth more than it looks.

📌Twenty percent down versus nothing down, over ten years

Take a €400,000 flat in Hamburg. Purchase costs are €30,000 either way and come from savings in both cases.

With 20 % down, you put in €110,000 and borrow €320,000. With nothing down beyond the costs, you put in €30,000 and borrow €400,000. The second buyer borrows €80,000 more and pays a higher rate on all of it.

Over a ten-year fixed period, the difference runs into tens of thousands of euros in interest, and the second buyer also owns less of the flat at the end of it. That is the honest cost of buying sooner.

It can still be the right decision. Ten years of rent is also money that does not come back, and prices in the meantime are not fixed. The point is to make the comparison with real figures rather than deciding on the monthly payment alone.