Planning purchase costs
and financing correctly

Purchase costs

What they consist of

In Germany, purchase costs typically range from 7.5% to 15% of the purchase price, depending on the state and transaction. They may include:

• Transfer tax: 3.5% in Bavaria up to 6.5% in states including North Rhine-Westphalia, Brandenburg and Schleswig-Holstein.
• Notary: about 1.0% to 1.5% for notarisation.
• Land register: about 0.5% for registration.
• Agent commission: depending on state and negotiation, often 3% to 7% plus VAT.

These costs do not increase the property value itself, but they require additional capital and therefore belong in total investment costs.

Financing

Understanding an amortising loan

Most property loans are annuity loans: the monthly payment stays constant for the agreed period and consists of interest plus principal. Interest is high and principal low at the beginning; as the balance falls, the proportions reverse. The equity contribution directly affects the monthly payment and therefore cash flow.

The companion article 30-year projection shows how interest, principal and remaining debt develop over three decades.

Loan structure

The payment is only one part of financing

A constant annuity payment looks predictable, but several dates matter. The fixed-rate period can end before the loan is fully repaid, leaving refinancing ahead. A low initial payment can therefore mean a high remaining balance.

• Monthly payment: What leaves your income or property cash flow initially?
• Remaining debt: How much is outstanding after the fixed-rate period?
• Refinancing rate: Does the plan survive a higher interest rate?
• Flexibility: Can you make extra repayments or adjust the payment in a good year?

Compare more than the lowest advertised rate. Financing is a timeline, not just a monthly number.

Before signing

Numbers to check before the contract

Before the notary appointment, list renovation, initial reserves, appraisal, moving and furnishing costs and when each payment falls due. Not every item is paid on the same day, but every item belongs in the capital plan.

Ask to see the financing as a time series. The monthly payment says little without the remaining balance at the end of the fixed-rate period. For a rental property, inspect rent, costs, vacancy and loan payment together.

• Before purchase: Set out total investment, equity and liquidity reserve.
• During the fixed-rate period: Monitor cash flow, repayment and reserves.
• Before expiry: Calculate remaining debt and possible refinancing rates early.
• Do not force a pretty result: If costs must be omitted to make financing work, the property is not modelled honestly.