Equity for buying a property explained
Why equity matters so much
Equity is the part of the total costs you pay without a loan. The more equity you bring in, the lower the risk for the bank. It rewards this with lower interest rates, and you need a smaller loan.
Equity includes, for example, savings in accounts, securities, building savings and land that is already paid for. Some banks also accept a limited amount of your own work on a new build.
How the equity calculator works
Enter the purchase price, federal state, whether an estate agent is involved, and your available equity. The calculator uses an estimated standard rate for notary and land registry costs and shows:
- Purchase costs: transfer tax, notary and land register as well as broker commission.
- Purchase costs you may want to cover with equity.
- The amount still needed to cover the purchase costs with equity.
- Equity ratio and required loan based on your available equity.
How much equity makes sense?
Covering purchase costs with equity is a common guide. The equity a lender expects and the terms it offers depend on your circumstances and the property.
Full financing without equity is possible, but more expensive and requires a high, secure income. For investment properties, less equity can make sense for tax reasons, but it increases the risk.
What the calculator does not cover
The equity calculator provides a simplified estimate. Some points are deliberately not included:
- Costs for renovation, modernisation or moving.
- A liquidity reserve for unexpected expenses, which you should plan on top.
- Individual requirements of your bank regarding income, credit rating and lending value.
- Subsidised loans, for example from KfW, which partly act like equity.
