Buying a home is a big step. It’s even bigger when you’re planning to buy property in a foreign country like Germany. The usual process that you may be familiar with back home is not relevant at all when you are thinking of buying in Germany. The laws are different, the culture is different, and the timeline is not going to go as you would expect.
Everything will be different from getting healthcare in Germany to dealing with banks. So, a house is just going to be a bit different as well. Does that mean that you shouldn’t buy a property in Germany? Not in the slightest! If you are looking to buy property there then you just have to know how things work before you get started. In this article, we will go over several of the things to know ahead of time to make sure you don’t waste time or money.
1 – The notary
Many people often wonder if they are even allowed to buy a property in Germany if they aren’t citizens. The good news is that there are no special restrictions for foreigners. This means you can buy and own property in Germany no matter where you’re from. However, that statement comes with a few caveats.
The first thing to sort out is getting legal help to navigate the laws and process. In Germany, you need a notary in addition to your real estate agent to help. A notary in Germany is different from a notary in many other countries. In Germany, a notary is a highly trained lawyer.
They must make sure that all the details of the property sale are legal. They are responsible for checking all the documents, making the contract, and registering the sale.
A key thing to remember about the notary is that they work for both the seller and the buyer. A notary in Germany needs to be neutral to make sure that both sides are being served correctly.
It’s the notary’s job to make sure everyone understands the contract. They will explain all the details to you before you sign anything. It’s a good idea to have a translator if you don’t speak German.
2 – The financing
One of the biggest hurdles you will face when buying a property in Germany will likely be getting a mortgage. German banks offer mortgages to foreigners, but there are a few things to keep in mind.
The problem is that you probably don’t have any credit history and many banks will want to check your SCHUFA. In Germany, creditworthiness is often shown with a document called a SCHUFA credit report. Make sure to bring along copies of your credit reports because some banks will accept them in place of the SCHUFA.
You might need to show that you have a secure income. This could be from a job, a business, or investments. The bank wants to see that you can pay back the loan.
3 – Tax considerations
Buying property in a foreign country often means dealing with taxes you might not be used to. In Germany, there are some tax rules you need to know about.
The first tax to understand is the property transfer tax. This tax is based on the value of the property you’re buying. The rate varies from state to state, but it’s usually between 3.5% and 6.5%. It’s a one-time tax that you pay when you become the owner of the property.
The next tax is more familiar to most since it is a property tax. This is an annual tax based on the value of the property. It probably won’t be as high as what you would pay back home, however. But it can add up over time, so it’s important to include it in your budget.
4 – Know the risks
Buying a property in a land where you are unfamiliar with local customs and laws poses some challenges and Germany is no exception. It can still be a smooth experience but you have to know what the risks are to be able to avoid them.
One common challenge is the language barrier. Legal contracts and negotiations are usually conducted in German. This can make the process difficult if you’re not fluent in the language. Your best bet is to hire a translator to help you through the process without any miscommunications.
Another issue is managing the financing and paperwork from abroad. This can be time-consuming and confusing, especially if you’re not familiar with German laws and banking practices.
Conclusion
Despite the challenges, buying a property in Germany shouldn’t be too much of a problem for a foreigner. In fact, the robust banking infrastructure and rules based system should make it a fairly straightforward experience. Just a little bit different than what you’re used to.
