Financing Plan

A financing plan is a structured overview of all income and expenses related to the purchase, construction, or renovation of a property-from the initial investment and ongoing costs to long-term debt repayment. A solid financing plan is the foundation of any responsible construction financing and is required by banks as part of the credit assessment process.

Components of a Financing Plan

A complete financing plan consists of three main sections:

1. Source of Funds (Where does the money come from?)

Item	Amount (Example)
Equity (savings, investment account)	€100,000
Parent loan / gift	€30,000
Home savings contract (home savings balance)	€20,000
Bank annuity loan	€350,000
KfW Subsidized Loan (e.g., BEG)	€50,000
Total Source of Funds	€550,000

2. Use of Funds (Where Does the Money Go?)

Item	Amount
Purchase price / Construction costs	€480,000
Real estate transfer tax (Bavaria 3.5%)	€16,800
Notary and land registry	€8,000
Real estate agent’s commission	€17,000
Moving / Initial furnishings	€15,000
Contingency fund	€13,200
Total funds used	€550,000

3. Affordability Calculation (Can I afford this?)

• Monthly net income (both partners): €6,000
• Monthly loan payment (annuity): €1,800
• Property management fees / maintenance costs: €200
• Living expenses: €3,000
• Remaining disposable income: €1,000

As a rule of thumb: The monthly loan payment should not exceed 35% of net income.

Dynamic Planning: Interest Rate Risk

A good financing plan also takes into account the period after the fixed-rate term ends:

• What is the remaining balance after the fixed-rate term ends?
• At what interest rate can the follow-up financing still be sustained?
• Is the repayment sufficient to largely pay off the loan by the time you retire?

Anyone planning a loan of 350,000 euros with a ten-year fixed-rate period should always include a stress test scenario in their financing plan, assuming a refinancing interest rate that is 2 to 3 percentage points higher. Only if this scenario remains affordable is the financing truly sound.

Closing Costs: The Often Underestimated Item

In Bavaria, the following closing costs apply when purchasing real estate, and they must be fully accounted for in the financing plan:

• Real estate transfer tax: 3.5% of the purchase price - one of the lowest rates in Germany
• Notary and land registry fees: approx. 1.5 to 2% of the purchase price
• Broker’s commission: up to 3.57% incl. VAT, depending on the agreement (capped by law since 2020 at half of the total commission for buyers)
• Financing costs: registration of a land charge with the notary, appraisal costs if applicable

These incidental purchase costs-totaling approx. 9 to 12% of the purchase price in Bavaria-should ideally be covered by equity. Banks that co-finance these incidental costs typically charge significant interest surcharges.

Plan for a renovation reserve and operating costs

A comprehensive financing plan does not end with the closing of the purchase. Anyone purchasing an existing property must budget for ongoing maintenance costs:

• For owner-occupied homes, we recommend a renovation reserve of 1 to 1.5% of the building’s value per year (not the purchase price)
• Heating systems, roofs, facades, and windows have limited lifespans-failing to budget for these costs can lead to financial hardship in an emergency

Practical Tip for Homeowners in Nuremberg and Franconia

We recommend that prospective buyers in Nuremberg work with an independent financial advisor to create a financing plan before the notary appointment-not just with their primary bank, which typically offers only its own products. A good offer from the metropolitan area compares at least 5 to 10 banks and savings banks. We work with trusted financing partners and can provide a recommendation upon request. Also remember to factor in government subsidies: KfW loans (e.g., BEG residential buildings) and BayernLabo loans for families can significantly reduce your monthly payments. Especially in the Nuremberg metropolitan region, where purchase prices have risen significantly in recent years, a realistic and comprehensive financing plan is crucial-not only for securing bank approval but also for your own financial security over the entire term of the loan.

Frequently Asked Questions

What documents do I need for a financing plan at the bank?

Typically: proof of income (pay stubs from the last 3 months, tax assessment notice), self-disclosure form, bank statements, proof of equity, property listing / draft purchase agreement, and land registry extract.

Should I include a buffer in the financing plan?

Yes, absolutely. We recommend a reserve of at least 5-10% of the total costs for unforeseen expenses-especially when purchasing existing properties, where renovation and restoration costs are often underestimated. The buffer should be kept liquid (not invested).

How long is a bank’s financing offer valid?

Bank commitments (loan offers) are generally valid for 2 to 4 weeks. Financing confirmations (for the real estate agent to prove financial viability) are often valid for only 1 to 2 weeks. Therefore, plan to submit financing requests close to the scheduled closing date.

What should I do if my income situation changes after the purchase?

If foreseeable changes in income are imminent (parental leave, self-employment, job change), these should be factored into the financing plan as scenarios. Many banks offer special repayment options or repayment deferrals that provide flexibility in the event of a financial crunch. Clarify these options when signing the contract.

Which subsidy programs should I include in my financing plan in Nuremberg?

Various subsidy programs are available in the Nuremberg metropolitan region that can significantly ease the burden on your financing plan. The KfW program “Climate-Friendly New Construction” (KFN) offers low-interest loans for new buildings with high energy efficiency (EH 40 or better) up to a loan amount of 150,000 euros. The BayernLabo housing loan is aimed at middle-income families in Bavaria and offers subsidized interest rates as well as repayment subsidies. For building renovations, the KfW-BEG program (Federal Funding for Efficient Buildings) provides investment grants of up to 15% and supplementary KfW loans. For purchasers of a historic building or a building in a protected ensemble area, additional tax depreciation options are available under Sections 7h/7i of the German Income Tax Act (EStG), which can significantly reduce the effective financial burden. We recommend considering all eligible subsidy programs as early as the financing planning phase and combining them with an independent financing broker who is familiar with the current terms and application requirements.

Financing Plan and Bank Meeting: What Banks Really Look For

When assessing creditworthiness, banks evaluate not only current income but also the long-term sustainability of the financing. In the Nuremberg metropolitan region, lending institutions pay particular attention to three factors: the stability of your income situation (no temporary employment contracts, sufficiently long tenure with your employer), the ratio of the loan amount to the property’s appraised value (a loan-to-value ratio below 80% is considered comfortable), and a fully documented financing plan with no gaps. A self-disclosure form detailing all income and expenses, current bank statements from the past three months, and a realistic budget plan provide the bank with the necessary confidence. Anyone buying a property in Nuremberg that still requires renovation should explicitly list the renovation costs in the financing plan and substantiate them with quotes from contractors or appraisals from experts-banks will only co-finance renovation budgets if they are sufficiently documented.

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