How much equity do I need to buy a property?

Since interest rates have risen, many property seekers have realised that property financing is still possible. Banks are willing to finance, there are state subsidies and prospective buyers have greater room for negotiation. However, one question remains: how much equity do you need to bring with you?

Equity refers to financial resources that you have saved up and are contributing to the property purchase. As a rule, banks expect a portion of the purchase price of the property and the ancillary purchase costs (land transfer tax, notary, estate agent commission) to be covered by equity. Basically, the more equity you contribute, the lower the financing costs and the better your chances of obtaining a loan.

How much equity is recommended?

Property experts recommend an equity share of 20 to 30 percent of the purchase price of the property. The higher the percentage, the lower the interest costs because the financing amount is reduced. As already mentioned, the equity should also cover the ancillary purchase costs, which amount to around 10 to 15 per cent of the purchase price.

Sample calculation

Purchase price of the property 300,000 euros
Service charges 10 % 30,000 euros
Total costs 330,000 euros
Equity capital 20 % 66,000 euros

The equity share is paid directly to the seller. This reduces the amount that has to be financed by the bank.

How much property can I afford?

When financing, you should make sure that the monthly instalment payment for the repayment of the loan does not exceed 35 percent of your net household income. To calculate how much property you can afford, you should carry out a budget calculation. Compare your fixed costs with your monthly net household income.

How much room for negotiation do I currently have?

There are currently opportunities for buyers. Although many people would still like to buy a property, many have become more cautious. For property sellers, this means that they need longer to find a buyer. It is therefore currently worthwhile for prospective buyers to disclose their financing limits to the seller, i.e. to show them how much they can afford. To avoid making any mistakes and weakening your negotiating position, it is advisable to be accompanied by an experienced property professional. They have the necessary negotiating expertise and know how to communicate with the seller.

Are you looking for support when buying or financing a property? Get in touch with us! We will be happy to advise you.

Hint

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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