Payment Requirements

Disbursement Requirements - Disbursement requirements are the conditions defined by the lending bank, the fulfillment of which triggers the disbursement of a real estate loan. They ensure that the bank has sufficient collateral before the loan is disbursed. Full compliance with all requirements is a mandatory prerequisite for the disbursement of funds-without it, the loan remains on hold despite approval.

Overview of Standard Conditions

Although the specific requirements vary depending on the bank and type of financing, the following points are standard:

• Mortgage security: Registration of the mortgage in the land registry or submission of a notarized confirmation of priority as proof that registration at the agreed priority level has been applied for
• Proof of purchase agreement: Certified copy of the notarized purchase agreement, specifying the purchase price, parties, and payment terms
• Proof of insurance: Confirmation of residential building insurance with a clause assigning compensation claims to the bank (Section 1127 of the German Civil Code (BGB))
• Proof of down payment: Documentation of the use of the agreed-upon equity-such as a bank statement or a notary’s confirmation of receipt in the escrow account
• Identity verification: Compliance with KYC (Know Your Customer) requirements under the Money Laundering Act (GwG), typically already provided at the time of contract execution

For new construction and renovations, additional requirements apply: building permit, construction progress report from an expert for partial disbursements, and a notice of completion for the final installment.

Process Flow from Loan Approval to Disbursement

The time between loan approval and actual disbursement is often underestimated. A typical process looks like this:

Step	Responsible Party	Typical Duration
Notarization of purchase agreement	Notary	Single appointment
Submission of documents to the bank	Buyer / Notary	1-3 days after notarization
Creation of land charge at the notary	Notary	1-2 weeks after notarization
Registration of the land charge in the land registry	Local court	3-8 weeks
or: Notary confirmation (ranking confirmation)	Notary	3-7 business days after notarization
Review and disbursement approval by the bank	Lending institution	2-5 business days after all documents are complete
Total duration (with notary confirmation)		approx. 2-4 weeks

Common Pitfalls

In practice, timely disbursement often fails due to avoidable delays:

• Land registry backlog: Registering the land charge can take several weeks at busy land registry offices-including the Nuremberg Local Court. A notary confirmation (priority confirmation) significantly speeds up the process.
• Missing documents: Incomplete insurance certificates or missing assignment declarations are common reasons for follow-up inquiries from the bank. Submitting a complete set of documents on the first attempt saves time.
• Outdated home insurance: Some buyers only realize after the notary appointment that the seller’s insurance does not automatically transfer to them. Check in advance whether the existing policy will be transferred or if a new one must be taken out.
• Commitment fees: If the disbursement is delayed beyond the commitment-free period, additional costs will apply-typically 0.25% per month on the undrawn amount. For 300,000 euros, this amounts to 750 euros per month.
• Payment deadline in the purchase agreement: A payment deadline set too short in the purchase agreement (e.g., 14 days after notarization) will inevitably lead to default, as the disbursement requirements cannot be met within this timeframe.

Special Provisions for Property Developer Contracts (MaBV)

For new construction projects by property developers, the disbursement regulations of the Real Estate Broker and Property Developer Ordinance (MaBV) also apply. Payments are tied to a maximum of 13 installments, which are based on the progress of construction. For each installment, the developer must provide proof of construction progress-the buyer’s bank will then only disburse funds to the extent that such proof is provided. This protects the buyer from making advance payments without receiving anything in return.

Practical Tip for Homeowners in Nuremberg and Franconia

We recommend that real estate buyers in the Nuremberg metropolitan area create a disbursement checklist together with their bank advisor immediately after the notary appointment and plan the deadlines realistically. Ask your notary to issue the priority confirmation as early as possible-most notary offices in Nuremberg send this to the bank within a few business days after notarization.

Agree to a payment term of at least four to six weeks after notarization in the purchase agreement-this provides sufficient time to meet all disbursement requirements without falling into default with the seller. Inform the seller or real estate agent early on if delays are foreseeable.

Frequently Asked Questions

How long does it take from fulfilling all requirements to receiving the funds?

Once all documents have been received, most banks disburse funds within three to five banking days. At some institutions, disbursement is possible as early as the next business day if all requirements are submitted electronically. Nevertheless, plan for a buffer-especially before holidays or at the end of the quarter, when banks have a higher volume of transactions to process. In the Nuremberg area, we’ve had good experiences with having a personal contact person in the financing department who proactively communicates the status.

Can the bank refuse to disburse funds even if all requirements have been met?

In exceptional cases, yes-for example, if the borrower’s financial circumstances deteriorate significantly between the loan approval and the disbursement (e.g., job loss, insolvency, significant deterioration in creditworthiness) or if it turns out that the property has depreciated in value (e.g., due to a fire or newly discovered damage). In such cases, the bank has an extraordinary right of withdrawal under Section 490(1) of the German Civil Code (BGB). In practice, this scenario is rare-nevertheless, it is advisable to avoid any significant changes in your financial situation between the loan approval and the disbursement.

What is the difference between a partial disbursement and a full disbursement?

In the case of a full disbursement, the entire loan amount is transferred at once-this is the standard procedure when purchasing an existing property. As soon as all disbursement conditions are met, the bank transfers the full amount to the seller or to a notary escrow account. With a partial disbursement, the loan is paid out in several installments according to the progress of construction-common for new construction or extensive renovation projects. For each partial disbursement, the requirements for the respective tranche (e.g., MaBV construction progress report) must be met separately. Commitment interest accrues on the amount not yet drawn down until the tranche is drawn down.

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