Funding requirements

Financing requirement refers to the amount of money needed to purchase or build a property that is not covered by existing equity-that is, the amount that must be financed through loans or grants. It is calculated by subtracting the equity invested from the total costs (purchase price plus ancillary costs).

Calculating Financing Requirements

Determining financing requirements involves three steps:

Step 1: Determine Total Costs

When purchasing real estate in Bavaria, the total costs consist of:

Cost Item	Typical Amount
Purchase price of the property	100% (base)
Real estate transfer tax (Bavaria)	3.5% of the purchase price
Notary and land registry fees	approx. 1.5-2% of the purchase price
Broker’s commission (split 50/50)	approx. 1.5-3.57% of the purchase price
Moving costs, initial furnishings	Varies (approx. €5,000-20,000)
Renovation/remodeling costs	Depends on the property
Total incidental costs	Approx. 6.5-9% of the purchase price

Step 2: Subtract available equity

Equity includes: savings (checking account, money market account), home savings account balances, securities accounts (realizable), gifts from relatives, interest-free loans.

Step 3: Calculate financing needs

Financing requirement = Total costs − Equity

Example: Purchase price €450,000, incidental costs 8% = €36,000, total costs €486,000, equity €120,000 → Financing requirement = €366,000.

Equity Ratio and Loan-to-Value (LTV)

Banks assess the financing requirement in relation to the property value as the Loan-to-Value (LTV):

• LTV below 60%: Best terms, lowest interest rate
• LTV 60-80%: Very good terms, standard range
• LTV 80-100%: Surcharges, higher creditworthiness requirements
• LTV over 100%: Full financing including ancillary costs - only possible with very good creditworthiness

We recommend at least 20-30% equity to secure attractive interest rates and keep the monthly payment within a reasonable range.

Financing Needs and Monthly Payment Capacity: Determining the Right Amount

In addition to determining your financing needs, assessing your monthly payment capacity is crucial. As a rule of thumb, the monthly loan payment (interest + principal) should not exceed 30-35% of your monthly net household income.

A sample calculation for Nuremberg (as of 2025):

Assumptions: Purchase price €420,000, equity €100,000, financing requirement €320,000 (after closing costs + equity), interest rate 3.8% p.a., principal repayment 2% p.a.

Key figure	Value
Monthly payment (annuity)	approx. €1,547
Required net household income (30%)	approx. €5,150
Required net household income (35%)	approx. €4,420

If the household income is significantly below this figure, either more equity is required or a more affordable property must be selected.

Subsidies to reduce financing requirements

Well-planned subsidies can significantly reduce the actual financing requirements. For buyers in Bavaria and Nuremberg, the following programs are available:

KfW Residential Building Program (Product 261): Low-interest loans for the purchase of new or existing buildings with high energy efficiency. If certain energy efficiency levels are met, repayment subsidies are also available.

BayernLabo - Homeownership Program: The Bavarian State Land Credit Institution offers low-interest loans for the purchase of owner-occupied residential property in Bavaria. Priority is given to families with children and first-time homebuyers.

KfW Family Housing Loan (Product 300): Program available since 2023 for families with at least one child who are buying or building an Efficiency House 40. Particularly favorable terms.

BAFA Grants for Renovation: Anyone who purchases an existing building in need of renovation and carries out energy-efficient renovations can receive BAFA grants for individual measures. These reduce the financing requirements for the renovation.

Practical Tip for Homeowners in Nuremberg and Franconia

In Nuremberg, we regularly see prospective buyers underestimate their financing needs-because they forget about utility costs or estimate them too low. The real estate agent’s commission in particular (in Bavaria, the “buyer-pays” principle has required a 50/50 split between buyer and seller since 2020) comes as a surprise to many.

We recommend calculating financing needs realistically and holding a financing consultation with at least two banks or an independent financial advisor before the actual purchase process begins. For government employees, civil servants, and families with children, it is also worth exploring KfW promotional loans and Bavarian subsidy programs (BayernLabo). If needed, we can connect you with experienced financial advisors in the region who can compare options across the market.

Frequently Asked Questions

How much equity do I need to buy a property in Nuremberg?

As a rule of thumb: The closing costs (approx. 6.5-9% of the purchase price) should be paid entirely from equity, plus ideally 10-20% of the purchase price as additional equity. For a purchase price of 400,000 euros, that amounts to at least 60,000-80,000 euros in equity. Those who cannot cover the closing costs with equity significantly increase their financing needs and pay much higher interest rates.

Can I reduce my financing needs through grants?

Yes. KfW loans (e.g., for energy-efficient construction or renovation) and BayernLabo loans (for families and first-time homebuyers) can partially cover financing needs at more favorable terms than market loans and reduce the overall financial burden. It is crucial to submit grant applications before signing the contract (or before construction begins), as retroactive applications are generally not accepted.

What is full financing?

Full financing (also known as 100% or 110% financing) means that not only the purchase price but also the ancillary costs are fully financed through a loan. This is possible with a very good credit rating, but comes with significantly higher interest rates-the additional interest expense over the term of the loan is often 20,000 to 50,000 euros or more when compared to 80% financing.

How does the financing requirement change as interest rates rise?

The financing requirement as an absolute amount remains the same-it is independent of the interest rate level. What changes is the monthly payment for the same loan amount. If the interest rate rises from 2% to 4%, the monthly payment on a loan of 300,000 euros (2% principal repayment) increases from approximately 1,000 euros to approximately 1,500 euros-a 50% increase in the financial burden. This can significantly reduce the amount of financing that is financially feasible, as the debt-to-income ratio (installment to income) quickly reaches its limits.

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