Savings and loans in Germany
When you purchase a property in Germany, you don't take out a mortgage
Instead, you take out a building loan contract, or Bausparvertrag. These loans are generally offered by a group of financial institutions called Bausparkassen, which are similar to building societies, and specialize in connecting consumers with properties.
Before they can obtain a Bausparvertrag, customers must usually save a certain amount with the Bausparkassen. If you save this amount, you will automatically become eligible for the loan, at a pre-set interest rate.
If you intend to save for a home loan in Germany, always look for hidden fees along with the main interest rate. What looks great at first, can sometimes come with major costs later on.
Alternatively, some loans do not require any upfront savings. Instead, an agreement is made to pay into a special savings account while the home is paid off. Again, this comes with a fixed interest rate in many cases.
These loans aren't for everyone, and may not suit expats living in Germany due to the long payment periods involved. German savings and loan institutions are also quite conservative, requesting in-depth evidence of your financial situation, and often demanding high deposits.
For these reasons, renting remains popular among international residents. With 1 bedroom apartments available for €500-700 per month, that's often achievable, even in larger German cities.