There are many other costs added to the price of a property, which quickly make the purchase much more expensive. Which are they? And how much house can you actually afford?
Anyone who browses online portals for their dream property – whether specifically or simply out of curiosity – can specify which price category they have in mind. The problem is that in Germany it is not just the purchase price of a property that is taken into account, but also the costs incurred during the purchase process. And they are not insignificant. The actual price is often added to by up to ten percent. What costs should interested parties actually expect?
Federal states decide on the amount Real estate transfer tax
A large part of the additional purchase costs arise from the so-called real estate transfer tax, which is incurred when purchasing a property – regardless of whether it is built on or not. The basis for assessment is the purchase price of the property or land. The money collected flows into the coffers of the states and is used, for example, to expand infrastructure or schools.
How high the real estate transfer tax actually is depends on the respective federal state. North Rhine-Westphalia, Saarland and Thuringia levy a tax rate of 6.5 percent of the purchase price. If the property costs 400,000 euros, 26,000 euros would be due in North Rhine-Westphalia for the property transfer tax alone. The lowest tax rate is paid in Bavaria at just 3.5 percent.
If the house is sold among close relatives, no real estate transfer tax has to be paid – for example if the property is sold by the grandmother to her granddaughter or grandchild. And anyone who inherits the house does not have to pay any real estate transfer tax. However, inheritance tax sometimes applies.
Costs for notary – and possibly for the broker
The additional purchase costs also include the costs for the notary. This is there to certify the purchase contract and to eliminate legal misunderstandings between buyer and seller. The notary also takes care of the entry of the new owner in the land register and issues the certificate of the real estate transfer tax paid.
For this he receives just under 1.0 to 1.5 percent of the purchase price plus 0.5 percent for the land registry costs. In total, this is up to two percent of the purchase costs that go to the notary – in the case of a 400,000 euro property that would be up to 8,000 euros. If a house is purchased through an agent, they, as an agent, also receive a commission of between two and seven percent of the purchase price including VAT.
When it comes to additional costs, a rule of thumb is that just under ten percent are added to the actual purchase price in the form of additional purchase costs. For a house for 400,000 euros, buyers can expect around 40,000 euros in additional purchase costs alone.
Podcast “Gold & Ash: House Purchase Project”
In the first season of “Gold & Asche” the ARD financial editorial team The most important things when buying a house are examined step by step in seven episodes – with background information and expert knowledge. You can hear it in the ARD audio library and wherever podcasts are available. The individual episodes You will find here.
Episode 1: Is it worth buying a house? (21st of February)
Episode 2: The Right Time to Buy a Home (February 21)
Episode 3: How much house can I afford? (February 28)
Episode 4: What do I have to pay attention to when getting a loan? (6th March)
Episode 5: How the state provides financial support for buying a house (March 13)
Episode 6: Everything about energy renovation (March 20)
Episode 7: Was everything better before? (27th of March)
Ongoing costs
In addition, owners also have ongoing costs: These include property tax, the costs of waste disposal, water and energy. Although some of these costs also apply to tenants, they are generally higher for a homeowner.
One of the largest and often underestimated additional cost factors is probably the maintenance costs. Experts estimate specific annual amounts for these. They vary depending on the assessment basis. Sometimes these forecast costs relate to a percentage of the purchase price, sometimes to the age and the number of square meters. Ultimately, they arise when the roof needs to be repaired, the windows are broken or plumbing systems need to be replaced.
The consumer advice center in Hamburg assumes 3.0 to 3.50 euros per square meter of living space per month for housing benefit in new buildings – i.e. waste disposal and administration costs – and for maintenance costs. For old buildings, she expects three to four euros per square meter. For a new house with 140 square meters, that would be around 5,880 euros per year – or 490 euros per month.
Your own preferences are important
Niels Nauhauser from the Baden-Württemberg consumer advice center emphasizes that these are only rules of thumb. “These are all just estimates. You just have to think about what is realistic for my property in each individual case,” he says in the podcast “Gold & Asche: Project House Purchase”. ARD financial editorial team. In addition, the maintenance costs also depend on your own requirements. “There are households where the kitchen has been there for 40 years and in other households it is replaced after 15 years.”
When it comes to the total costs for a property, it is important to have a certain buffer and not to calculate too tight, says Nauhauser. “Even if you move into a new turnkey house, it may well be that it will be more expensive than you initially planned.” Older properties in particular could require greater renovation work because craftsmen have become more expensive. So how much can you actually afford in real estate given the high purchase costs and additional running costs?
Make a cash grab
If you want to be debt-free by the time you retire at the latest, you usually pay off your property over 15 to 35 years. This depends on the one hand on the amount of the loan and on the other hand how much you have already saved and can repay each month. In order to find out how expensive a property can be, it must first be clear what would theoretically still be available for the loan after deducting all monthly expenses.
In addition to such a fall in funds, the costs for a car or pet must also be included on the list of expenses. The costs of maintaining a car in particular are often underestimated: a lot comes into play with repairs, MOTs, tire changes, vehicle taxes and petrol. It is roughly estimated that a car costs around 300 euros per month. Of course, the exact amount depends on many factors – such as whether it is a new or old car, a small car or an SUV.
But it’s not just about breaking down current expenses, but also about estimating future expenses. If you plan to move to the country, you may have to expect higher costs for buses, trains or fuel. Changes in your private life can also affect your household budget: For example, are you planning to have children? Do family members need care? This sometimes goes hand in hand with lower income when a short-term change to part-time is required.
20 to 30 percent equity is recommended
In addition to what goes into the account each month, there may also be savings, inherited money, or other assets that can be used to make purchases. This includes money that is in building savings contracts, shares, savings books or accounts. All of these funds play an important role in financing a property. Because without your own contribution this is usually not possible.
Experts generally recommend that the so-called equity capital should cover 20 to 30 percent of the purchase costs including additional purchase costs. For a 400,000 euro property plus additional costs of 40,000 euros, equity between 88,000 and 132,000 euros would be required. Anyone who has little or no savings pays more for financing – or does not receive a loan at all because the bank considers the risk of possible default to be too high.
How expensive the house can ultimately be depends on the loan term, the loan interest rate and your income. There are several calculators online that determine how expensive the loan can be based on these factors. There are also simple rules of thumb: for example, that the monthly rate should not be more than 30 to 40 percent of the net household income or that the property including additional costs should not cost more than eight times the annual net income of a household. So if a family earns a net total of 50,000 euros a year, the property should not cost more than 400,000 euros.