Munich in English - selected by independent Locals for Cosmopolitans, Newcomers and Residents - since 1989

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June 2003

Homeward Bound

Looking to buy your own place? Here’s how

Munich must be the “des-res” (British-speak for desirable residence) capital of Germany. Walk along almost any street in Schwabing, Bogenhausen, Haidhausen or Nymphenburg and you will find rows of delightful properties just waiting to be acquired by you, if—and this is a big if—only you had the money. Even for those who have not set their sights on an expensive Altbau and would be content to own a small flat in one of the suburbs, borrowing money to finance property is done differently in Germany than, say, in Britain or the US. If, however, you are prepared to have a little patience and do some initial saving, there is the option of entering into a Bausparvertrag (home-savings agreement, literally, a build-and-save contract).

Bausparen (home saving) is a system of saving money aimed especially at financing private housing. The Bauspar client—nationality plays no role here, you don’t even have to be a resident of Germany—pays money into an account at a Bausparkasse (home savings association) of his or her choice (there are about 29 in Germany). The deposits (Beiträge) are then part of an (individual) home savings account out of which a loan (Darlehen) will be made once certain criteria have been fulfilled. The customer must have saved 50 percent of the sum agreed upon when the account is set up. Also anyone who wishes to receive the government subsidy (this is a 10 percent “Wohnungsbauprämie” on at least € 512 a year), which is part of the Bauspar system, must have saved for a minimum of seven years, before this subsidy is paid out. If this has been done the client will receive the savings (Ersparte), the interest (Zinsen) paid on those deposits, the subsidies and the loan all at the same time. Many Germans, by the way, set up a savings account of this type to finance other projects related to the home ownership, such as renovation work, extensions, buying land and so on. (After seven years it is also possible to spend the money on cars, holidays, etc.)

Though it is less common, it is possible to go to a bank and take out a mortgage in the same way that a house-buyer would do in the UK, for example. The Bauspar system does, however, have a number of advantages over a conventional mortgage. Firstly, the interest rates on both the savings phase and the loan phase are known to the customer from the beginning and are fixed—currently the interest rates paid by the Bausparkassen lie at about 2 percent. Interest on bank loans can fluctuate a great deal and the customer will not receive the aforementioned government subsidy if they do not save with a Bausparkasse. The Bausparkassen are able to offer the customer a better deal because they will have tested the creditworthiness of a customer before handing out a loan.

The minimum Bausparsumme (total home savings) is € 10,000 and there is no upper limit. A client can also augment (aufstocken) their savings with, say, an inheritance, but still continue to pay the same monthly installments. The savings account can be terminated at any time and the loss in interest is negligible. Those in regular employment, i.e. not self-employed or freelance, may also be eligible to receive contributions from their employer. In fact, it is possible to set up a home savings account without making any deposits other than those paid by the employer, though with these small payments (currently € 40) it will take a long time for a reasonable sum to accrue.

My thanks go to Sebastian Flaith, at the Bausparkasse Schwäbisch Hall AG, who explained the system to me and answered all my irritating questions.

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