Glossary
Eigenkapital
Eigenkapital: Eigenkapital (German for own capital, i.e. equity or down payment) is the share of the purchase price you pay from your own funds rather than borrowing from a bank. In Germany, lenders expect at least 20 to 30% of the price plus the closing costs, since a higher equity ratio (Eigenkapitalquote) earns noticeably lower interest rates.
What is Eigenkapital (equity / down payment)?
Eigenkapital is German for equity or own funds, the share of the purchase price you finance yourself rather than with a bank loan. The higher that share, the less you need to borrow, and the better your terms usually are. Banks treat the Beleihungsauslauf (loan-to-value) as a key metric: the lower your loan compared with the property value, the lower the risk for the bank, and the better the interest rate on offer.
The following count as Eigenkapital: bank balances and fixed-term deposits (Festgeld), quickly sellable securities (shares, funds, ETFs), allocated building-society savings (Bausparguthaben, but not the Bauspardarlehen), life insurance payouts, land or property you already own outright, and tax-free gifts. Parents can pass up to 400,000 euros tax-free to each child within ten years.
One point matters: the closing costs (Kaufnebenkosten: transfer tax, notary, land registry, and any agent commission) run to 8.5 to 15% of the price depending on the Bundesland, and should be covered entirely from equity. Banks usually will not finance them. So if you can bring 20% of the price plus the additional costs, you count as solidly financed.
Calculating Eigenkapital: an example
Purchase price: €400,000, closing costs (Bayern, approx. 10%): €40,000, total need: €440,000
| Scenario | Equity | Loan | Loan-to-value | Rate (approx.) | Monthly payment |
|---|---|---|---|---|---|
| 30% equity | €120,000 | €320,000 | 80% | 3.5% p.a. | approx. €1,760 |
| 20% equity | €80,000 | €360,000 | 90% | 3.9% p.a. | approx. €2,100 |
| 0% equity | €0 | €440,000 | 110% | 4.5% p.a. | approx. €2,750 |
(Assumptions: 2% initial repayment, 10-year fixed-rate period. The rates are guide values for early 2026.)
The difference between 30% equity and full financing in this example is around €990 per month. Over 10 years that adds up to almost €120,000 more in payments, before the fixed-rate period even ends.
Good to know
- Equity ratio and interest rates: Banks tier their rates by loan-to-value. The best terms are typically available up to a loan-to-value of 60%. From 80% the rates rise noticeably, and from 90% further risk premiums come on top.
- Budget for closing costs separately: These costs are rarely financed along with the loan. If you cannot cover them from your own funds, you effectively have no equity and pay full-financing terms.
- Full financing as the exception: A 110% financing is only realistic for buyers with very high, secure income and first-class credit. Few banks offer it, and the interest premiums are considerable.
- Non-residents and foreign income: German banks do lend to foreign buyers, but if your income comes from outside Germany, expect to put down more, often 30 to 50% equity, with stricter income and documentation checks.
- Guidance for 2026: According to financing experts, buyers brought in around 27% equity on average in 2025. As a rule of thumb, at least the closing costs plus 10 to 20% of the purchase price should come from your own funds.
Legal basis
The duty to run a creditworthiness assessment for property financing comes from sections 505a to 505e BGB (Bürgerliches Gesetzbuch, the German Civil Code), which transposed the EU Mortgage Credit Directive (MCD, 2014/17/EU) into German law. Banks must check, before they lend, whether the borrower can service the loan over the long term. The equity ratio is a central criterion here, because it directly affects the lender's default risk. There is no legally fixed minimum equity ratio; each bank sets the requirements within its own lending policies.
Frequently asked questions
Eigenkapital translates as equity or own funds, and is often called the down payment. It is the part of the purchase you pay yourself, out of savings and other assets, instead of borrowing it from a bank. The more Eigenkapital you put in, the lower your loan-to-value (Beleihungsauslauf), and usually the better your interest rate.
Eigenkapital includes all your own funds that go in without a loan: bank balances and call money (Tagesgeld), securities (shares, funds, ETFs), the saved credit from an allocated Bausparvertrag, life insurance payouts, land or property you already own outright, and tax-free gifts from parents of up to 400,000 euros every ten years. The planned building-society loan (Bauspardarlehen) itself does not count as Eigenkapital but as borrowed capital (Fremdkapital).
Financing experts recommend at least 20 to 30% of the purchase price as equity. On top of that, the closing costs (transfer tax, notary, agent) should be covered fully from your own funds, since they add up to 8.5 to 15% of the price depending on the Bundesland. Combining both, the equity you need works out to around 30 to 40% of the purchase price.
With full financing (also called 110% financing), both the purchase price and the closing costs are funded entirely by credit. Banks charge significant interest premiums for this because the default risk is much higher for them. If property prices fall, the remaining debt can exceed the sale value. So in the worst case, payment trouble (job loss, illness) can leave you with remaining debt after a forced sale (Zwangsversteigerung).