German mortgage types: repayment, rates and risks
Compare repayment mortgages, fixed-rate periods, variable rates and subsidised loans. Understand remaining debt, flexibility and the questions to ask before signing.
Last updated: 18 September 2026
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Repayment mortgages: follow both the payment and the balance
An annuity mortgage combines interest and principal repayment in a regular instalment. With an unchanged rate and payment, interest falls as the balance reduces, leaving more of each payment to repay principal. A low initial repayment rate keeps the first payment down but leaves more debt for later.
Illustration, not an offer: a €300,000 loan at an assumed 4% annual nominal rate and 2% initial repayment has an initial annual payment of €18,000, or €1,500 a month. Fees and contractual details are excluded. Ask for a repayment schedule; multiplying the initial repayment amount by the number of years does not give the exact remaining balance.
Full repayment during the fixed-rate period
A full-repayment loan is structured to clear the balance within its agreed term. This removes refinancing risk for that loan if payments are made as planned, but can require a higher monthly commitment. Check how special repayments, payment changes or a sale would be handled.
Compare the full repayment schedule with a standard annuity loan at the same borrowing amount. Do not choose a high repayment simply to avoid refinancing if it leaves no room for repairs or an interruption to income.
Fixed rates and variable rates solve different problems
A fixed rate gives payment planning certainty for an agreed period, not necessarily for the lifetime of the debt. A variable rate can suit short-term funding only when you understand the reset mechanism and can absorb increases. Neither structure is universally best.
Compare fixed-rate periods and refinancing options. Include contractual flexibility and any early repayment cost in the decision, not just the headline rate.
Subsidised loans and savings-linked structures
KfW programmes can support eligible purchases or construction. Programme availability, technical requirements and application deadlines matter; a subsidised loan is still repayable debt. Use the current KfW information rather than an old advertised interest rate.
A home savings arrangement combines a savings phase with possible later borrowing under its conditions. Compare the combined cost, savings commitment, allocation timing and any interim loan. Do not compare only the later loan rate with a conventional mortgage.
A practical comparison checklist
- Use the same loan amount, payment assumptions and fixed-rate period.
- Compare effective annual cost, fees and interest charged before drawdown.
- Record the remaining balance at the end of each fixed-rate period.
- Check special repayment rights and repayment-rate changes in writing.
- Stress-test household costs and refinancing at a higher assumed rate.
Calculate the cash contribution available for your purchase before requesting comparable proposals.
Frequently asked questions
Does the end of the fixed-rate period mean the loan is repaid?
Not necessarily. A standard repayment mortgage can have a balance outstanding when its fixed-rate period ends. Ask for the projected balance and the payment needed if refinancing rates are higher.
Is a variable-rate loan always cheaper?
No. Its rate can change under the contract. Compare current costs, adjustment rules, possible future payments and your ability to repay it rather than relying on a short-term price comparison.
Can I combine a mortgage with KfW funding?
This depends on the programme, property and lender. Check current eligibility, permitted combinations and application timing before entering a binding commitment.
Sources and editorial scope
- German Civil Code: borrower termination rights (§ 489)
- KfW: current new-build and home ownership funding
Source check and editorial revision: 18 September 2026. The linked German-language primary sources take precedence. Examples are illustrative, not offers. This guide provides general information, not individual financial, tax or legal advice. A lender must assess your specific circumstances.