Good to know! The most important technical terms

Abgeschlossenheitsbescheinigung

The certificate of the building supervisory authority that the premises are locked according to the German Condominium Act (WEG), i.e. structurally separated from other residential units and have their own lockable access from the outside.

Abnahmeverpflichtung

The obligation of a borrower to have the loan paid out within an agreed period (acceptance period).

Abschreibung

The reduction in the value of assets, a certain percentage of which can be claimed annually as a tax loss in the course of determining income from renting and leasing. Even in the case of rented real estate, a certain percentage of the acquisition and production costs of the building can be claimed annually as tax-reducing depreciation. It is important to note that this does not apply to the land (= property), as this does not "wear out". Its value is not included in depreciation. A distinction is made between:

• Straight-line depreciation: annually constant depreciation amounts
• Degressive depreciation: annually decreasing depreciation amounts.

With declining-balance depreciation, a tax-reducing effect occurs earlier due to the initially higher depreciation. For new buildings, there is a right to choose between the two forms of depreciation. However, this option does not apply to old buildings, for which only straight-line depreciation is possible.

Annuitätendarlehen

A long-term loan that is repaid by the borrower in constant loan instalments (the so-called annuity). The annuity consists of interest and repayment. During the term, the interest portion of the instalment decreases, while the repayment portion increases due to the interest saved.

Allgemeine Darlehensbedingungen

Contractual provisions pre-formulated by the respective bank that apply to all customers when processing the loan. By signing the loan agreement, the general loan conditions are accepted.

Auflassungsvormerkung

It secures the claim under the law of obligations to the transfer of ownership of a property. The priority notice of conveyance is entered in section II of the land register. It protects the future owner from the seller selling a property to another person, for example, and (or) encumbering it with mortgages that are not related to the acquisition of the property.

Baubeschreibung

A detailed list of all the equipment and finishing features of a building project. Important contents of the building description are, for example, the condition of the walls and the roof, the heating system or the type of windows. It also provides precise information on the materials used in the construction. Because of its importance for assessing the quality of a building, the building description is an important part of the financing application. In addition, it must be attached to the application for a building permit.

Beleihungsauslauf

The share of the property value in percent that is financed with debt - i.e. mortgaged.

Beleihungswert

The amount set by the respective financing institution below the market value of a property. The mortgage lending value usually corresponds to the value that can be achieved at any time under normal circumstances in a subsequent private sale, i.e. the market value less a safety discount.

Bereitstellungszins

The fee for loans or parts of loans provided (refinanced) by the credit institution and not yet drawn down by the borrower. The commitment interest rate is usually 3 per cent per year or 0.25 per cent per month.

Disagio

The difference between the nominal amount and the actual disbursement of a loan. The discount represents an advance interest payment that results in the bank lowering the nominal interest to be paid. For capital investors, a discount can be interesting from a tax point of view, as it is part of the costs of raising money that are deductible as income-related expenses.

Effektivzins

Banks and lenders are obliged to calculate and indicate the APR according to § 4 of the Price Indication Ordinance (PangV). However, only those ancillary costs that are explicitly listed in the PangV are included in the APR. It should be noted that banks do not have to include all ancillary costs in the calculation (e.g. appraisal fees, partial valuation surcharges, etc.). As a result, the actual interest rate may be higher. The APR is only given for the period of its fixed interest rate and is therefore also called the initial APR.

Equity

Own assets used for real estate financing. Equity includes: Cash, bank and savings deposits, securities, own unencumbered real estate, building society savings and own contributions.

Eigenleistung

The personal labour (self-help, help from relatives and neighbours) that is provided to save on tradesmen's wages. The amount of personal labour is often overestimated. Risks lie in the high expenditure of time, the longer construction period, the partly insufficient professional qualification and the exclusion of warranty claims.

Grundbuch

The register kept at the district court, which shows the legal relationships of a plot of land. It provides information on the size and type of use of the property, on rights to other properties, as well as on ownership and which encumbrances and restrictions rest on the property. Anyone with a legitimate interest, such as the buyer, can inspect the land register. It enjoys public faith, i.e. the accuracy of the information can be trusted.

Grundbuchauszug

The complete transcript (copy) of all land register entries existing for a property, which can be requested from the competent land registry by anyone with a legitimate interest.

Grunderwerbsteuer

The tax burden on the purchase or acquisition of developed and undeveloped land. This is calculated differently from federal state to federal state and ranges from 3.5% to 6.5%.

Grundschuld

A third party's right in rem to a property (mortgage), which is entered in the land register in favour of the creditor. The land charge is not linked to a personal claim, but represents an unconditional payment obligation from the property.

Grundschuldbestellung

The owner of the land gives his consent to the encumbrance of his land in a notarised deed, together with the order to enter this encumbrance, i.e. the land charge, in the land register.

Grundschuldzins

The interest that is entered in the land register with the land charge. The amount of the land charge interest is independent of the loan claim and is therefore different from the loan agreements. In order to compensate for interest rate fluctuations and to cover all costs in the event of the borrower's insolvency, the interest is usually entered higher in the land register (usually between 15 and 20 percent). If you pay your instalments according to the contract, you will of course pay the nominal interest rate agreed in the loan contract.

Konditionen

Terms are those conditions under which a lender is willing to provide a loan. These include: Nominal interest rate, duration of the fixed interest period, disbursement rate, repayment rate as well as the start of repayment, processing costs and commitment interest. The most favourable financing in each individual case can only be determined by taking all parameters into account and carefully comparing the overall conditions.

Nachfinanzierung

Subsequent financing is the term used to describe a financing requirement that exceeds the amount originally contracted. Additional financing may become necessary if the costs planned for the construction project are exceeded during the construction phase and additional funds must therefore be raised.

Nominalzins

The interest rate at which interest is to be paid on a loan. It is calculated on the nominal amount of the loan. It is not to be confused with the effective interest rate.

Rangrücktritt

By notarially certified declaration, a creditor registered in the land register may change its previous ranking in favour of another, previously subordinate creditor.

Refinanzierung

The raising of funds by a credit institution in order to be able to lend. In the case of mortgage banks, this is done by issuing Pfandbriefe. The bank issues Pfandbriefe to investors and then passes the invested money on to borrowers.

Restschuld

Part of a loan that has not yet been repaid at a certain point in time. The amount of the respective remaining debt can be determined on the basis of an amortisation schedule.

Schufa

The abbreviation for "Schutzgemeinschaft für Allgemeine Kreditsicherung". Schufa receives information from its affiliated institutions to assess the creditworthiness of borrowers. It makes this information available to the banks upon request - of course under the strict observance of data protection.

Sondertilgung

Payment in excess of the agreed regular loan instalment. It usually leads to a shortening of the total term or a lower regular loan instalment

Teilungserklärung

The declaration of a property owner to the land registry that the ownership of the property is to be divided into co-ownership shares and that the separate ownership of certain premises of the existing building or of buildings yet to be constructed is to be connected with each co-ownership share. The division becomes effective with the creation of separate condominium land registers. This makes it possible to encumber these co-ownership shares independently. Among other things, the declaration of division provides information on which specific parts of the building are special, partial or common property.

Tilgung

The regular payment to repay a loan. The amount of repayment determines the amount of the loan instalment and the total term of the loan.

Tilgungsfreijahre

The agreement between the credit institution and the borrower that repayment of the loan debt will not begin until a certain period after the loan has been disbursed.

Debt restructuring

The repayment or rollover (extension) of the fixed interest rate of an existing loan by taking out a new loan.

Verkehrswert

The market value of a property is determined by the price that would be obtained in the ordinary course of business at the time of the determination.

Vorfälligkeitsentschädigung

The remuneration for the losses incurred by a credit institution in the event of an unscheduled repayment of a loan. In real estate financing, the interest rate conditions are fixed for a certain term. Credit institutions obtain (refinance) the funds necessary to issue the loan for exactly this term. If the loan is repaid early, the credit institutions may incur considerable losses depending on the amount of the interest rate, remaining term and residual debt, which they will then compensate via the early repayment penalty.

Wegerecht

The right to cross another property. Any reduction in the value of the property due to this right must be examined individually.

Zinsbindungsfrist

The period for which the interest conditions are fixed (fixed interest period).

Zwischenfinanzierung

Interim financing is used to bridge short-term credit needs - for example during the construction phase. The interim financing is later replaced by equity capital or the disbursement of the long-term financing funds.

Zwangsvollstreckung

The procedure regulated by law for the enforcement of claims under private law against a debtor.