Final payment

The final payment is the last payment made as part of a real estate financing arrangement or a developer contract, which settles the entire remaining debt or the outstanding purchase price. In the context of a balloon loan, it can be a particularly large one-time payment, or in developer projects, it can refer to the final installment due after the building has been accepted. Proper planning of the final installment is crucial for the buyer’s long-term liquidity.

Final Installment in a Developer Purchase

For turnkey new construction, the Real Estate Brokerage and Developer Ordinance (MaBV) governs the installments in which the purchase price is due. The final installment-the closing payment-is generally 3 to 5% of the total price and becomes due only after the building has been fully accepted and found to be free of defects. This provision protects the buyer: as long as defects remain unresolved, the final payment may be withheld.

Under Section 641 of the German Civil Code (BGB), the buyer may even withhold payment in an amount equal to twice the cost of remedying the defects until the contractor has rectified them. This leverage should be used deliberately-in practice, experience shows that developers respond much more quickly to withheld final installments than to mere notices of defects. We recommend conducting the final inspection with an independent expert to ensure that all defects are fully identified and documented.

Final Payment on a Balloon Loan

A balloon loan (also known as a bullet loan) involves only low principal payments during the term; a large final payment is due at the end of the fixed-rate period. This form of financing can be sensible if the borrower anticipates a large inflow of funds in the future (e.g., inheritance, sale of a business, maturity of a whole life insurance policy). The advantage: The monthly burden during the term is significantly lower than with a fully amortizing loan.

The risk: If the follow-up financing must be arranged under less favorable terms or the final payment cannot be made, there is a risk of foreclosure in the worst-case scenario. Careful financial planning that takes various interest rate scenarios into account is absolutely essential with this type of loan. In the current market environment (2025/2026), with interest rates rising again by historical standards, we advise against aggressive balloon loans.

Refinancing Instead of Paying the Final Installment

Those who cannot or do not wish to pay the final installment from their own funds should arrange follow-up financing. Important: Secure interest rates early-ideally 12 to 24 months before maturity. Forward loans allow you to lock in current interest rates for the future. In an environment of rising interest rates, this can mean savings of thousands of euros.

When choosing a refinancing partner, you shouldn’t automatically go with your primary bank. In practice, comparing different providers (branch banks, direct banks, brokers) often reveals significant differences in terms and conditions. Even extending (prolonging) the loan with your current lender doesn’t have to be the worst option if the terms are competitive.

Tax Aspects of the Final Payment

For landlords who have financed a property with outside capital, the interest on the remaining debt-including any balloon loan-is deductible as business expenses against income from renting and leasing. The principal repayment portions, however, are not deductible. With a final installment as part of a balloon loan, the interest portion is therefore particularly high and correspondingly advantageous for tax purposes-at the beginning of the term, hardly any principal is repaid, which is why the tax-deductible interest portion remains high.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg and the Franconia metropolitan region, real estate development projects are in high demand. When drafting contracts, buyers should ensure that the final installment is not due too early-for example, only after all exterior facilities have been completed and handed over. A final installment paid prematurely removes the developer’s incentive to promptly address any remaining defects.

Local notaries are familiar with the standard contract terms used by Nuremberg developers; contact us, and we can connect you with knowledgeable professionals and provide insights into the terms offered by common developers in the region.

Frequently Asked Questions

What is the typical amount of the final installment when purchasing a property from a developer?

According to the MaBV, the final installment is typically 3.5% upon the issuance of a building permit and the complete construction of the building. Many developers set it at 5% to have a buffer for remaining work. The exact amount is specified in the purchase agreement. For a purchase price of €500,000, this corresponds to a final installment of €17,500-€25,000.

Can I withhold the final installment if defects still exist?

Yes. According to Section 641 of the German Civil Code (BGB), the buyer may refuse acceptance or withhold a reasonable portion of the contract price as long as material defects have not been remedied. The amount withheld should be double the estimated cost of remedying the defects. For example, if the final installment is €20,000 and the cost of remedying the defects is estimated at €5,000, up to €10,000 may be withheld.

What happens if I cannot pay the final installment?

If you are late, you will be in default, late payment interest will accrue, and the creditor may take legal action. In extreme cases, if the property is secured by a mortgage, foreclosure may be a risk. Talk to your bank early on about follow-up financing to avoid this situation. A forward loan, taken out 12-24 months in advance, provides planning security.

What is the difference between the final installment and the last annuity payment?

The final installment in the context of real estate development contracts is a purchase price installment due after acceptance-it has nothing to do with the loan. The final annuity payment of a standard amortizing loan is the last regular monthly payment after which the loan is fully repaid. In the case of a balloon loan, the large one-time payment at the end of the term is also called the “final payment” or “balloon”-it is a loan repayment, not a purchase price payment. Anyone who has to manage both situations at the same time (purchasing from a developer with financing and a balloon loan) should carefully coordinate the due dates.

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