Glossary
Beleihungswert
Beleihungswert: Beleihungswert (German for mortgage lending value) is the value a bank assigns to a property as a durable, long-term security for a loan. It usually sits 10 to 30 percent below the current market or purchase price and largely determines how favourable the interest rate on a German property loan turns out.
What is Beleihungswert (mortgage lending value)?
Beleihungswert (German for mortgage lending value) is the value a lender assigns to a property as a long-term, sustainably achievable security. Unlike the purchase price or the current market value, the Beleihungswert has to stay stable over the entire term of the loan. Short-term market swings and speculative price spikes are therefore left out.
In practice, the bank sets the Beleihungswert 10 to 30 percent below the Verkehrswert (market value). Depending on the property type, the valuation uses the Sachwertverfahren (asset value method), the Vergleichswertverfahren (comparative value method) or the Ertragswertverfahren (income capitalisation method). Residential property is often valued with the Vergleichswertverfahren, while investment property is valued with the Ertragswertverfahren.
Two further key figures come out of the Beleihungswert: the Beleihungsgrenze (lending limit, the maximum loan amount) and the Beleihungsauslauf (the actual ratio of loan to Beleihungswert). Both feed straight into the interest terms.
Calculating the Beleihungswert: an example
Say a condominium is bought for €400,000. The bank arrives at a Beleihungswert of €340,000 (85 percent of the purchase price).
| Equity | Loan amount | Beleihungsauslauf | Interest impact |
|---|---|---|---|
| €40,000 (10%) | €360,000 | 106% | Very high premiums |
| €80,000 (20%) | €320,000 | 94% | Premiums |
| €120,000 (30%) | €280,000 | 82% | Moderate premiums |
| €160,000 (40%) | €240,000 | 71% | Good terms |
| €200,000 (50%) | €200,000 | 59% | Top terms |
The Beleihungsauslauf is worked out like this: loan amount divided by Beleihungswert, multiplied by 100. With a loan of €240,000 and a Beleihungswert of €340,000, the result is a ratio of 70.6 percent. Most banks tier their interest rates at the 60, 80 and 90 percent thresholds. Dropping below 60 percent usually brings the clearest savings on interest.
Good to know
- The Beleihungswert is not the purchase price: Banks set the Beleihungswert conservatively so they stay on the safe side even in a forced sale (Zwangsversteigerung, foreclosure auction). A high purchase price is no protection against a low Beleihungswert.
- The 60 percent lending limit as a refinancing basis: Pfandbrief banks (mortgage banks that issue covered bonds) may only issue Hypothekenpfandbriefe (mortgage covered bonds) up to 60 percent of the Beleihungswert. Loans above that limit count as uncovered and are refinanced at a higher cost.
- Aim for a Beleihungsauslauf below 80 percent: From 80 percent upward, rate premiums climb noticeably at most banks. Putting in more equity or negotiating a lower purchase price automatically improves your Beleihungsauslauf.
- The bank's own assessment: Each bank works out the Beleihungswert independently. Two banks can arrive at different values for the same property, so comparing several offers is especially worthwhile.
Legal basis
How the Beleihungswert is determined is set down in law. The basis is Section 16 of the Pfandbriefgesetz (PfandBG, the German Covered Bond Act), in force since May 2005. The detailed calculation rules are found in the Beleihungswertermittlungsverordnung (BelWertV, the Mortgage Lending Value Regulation), issued as an implementing provision to Section 16(2) PfandBG.
The law requires the Beleihungswert to be determined by a valuer who is independent of the lending decision and has proven professional experience and expertise. The value determined may not exceed the current Verkehrswert (market value).
Frequently asked questions
Beleihungswert translates as mortgage lending value. It is the value a bank assigns to a property as a long-term, durable security for a loan. Because it has to hold over the whole term of the mortgage, it is set conservatively and usually lands 10 to 30 percent below the current market or purchase price.
Banks usually set the Beleihungswert 10 to 30 percent below the current market value. On a purchase price of €400,000 it therefore often falls between €280,000 and €360,000. The exact discount depends on the location, condition and type of use of the property.
The Verkehrswert (market value) reflects the current market price of a property, while the Beleihungswert captures the value that can be achieved over the long term and sustainably. Since the Beleihungswert is meant to stay stable across the entire loan term, it is set more conservatively. By law, the Beleihungswert may not exceed the Verkehrswert.
The lower the Beleihungsauslauf (loan-to-value ratio), the cheaper the interest you are offered. Borrowers get the best rate tier with a Beleihungsauslauf up to 60 percent of the Beleihungswert. Above 80 percent the rate premiums rise noticeably, because the bank carries a higher risk of default.