Foreign Investors & Border Commuters

finbird advises foreign investors and cross-border commuters on real estate financing in Germany.

Foreign Investors & Border Commuters

finbird supports foreign investors and cross-border commuters with German Mortgages. We provide comprehensive advice in English and specialize in foreign investor and cross-border commuter situations.

Mortgages For Foreign Investors And Border Commuters

Foreign investors or non-residents are borrowers who do not reside in the country in which they wish to purchase a property. These individuals usually invest in a foreign real estate market for various reasons, e.g. because they are looking for a profitable capital investment, a holiday home or a residence close to the border to reconcile work and private life.

Purchasing and financing a property in Germany usually presents more challenges for foreign investors than for domestic residents. Since foreigners mostly do not have a permanent or any residence in the country, they are generally considered to be higher-risk applicants by banks and lenders. One of the reasons for this is that it is more difficult to assess the financial situation and income of borrowers from abroad because the standardized documentation and rules does not exist in the foreign country of residence of these borrowers. Furthermore, the legal options available to lenders when borrowers from abroad default on loan repayments are less certain and less clearly defined than for domestic borrowers. Banks must take this into account in their creditworthiness assessment. As a result, lenders often demand a higher equity ratio and sometimes adjusted loan terms to reflect the increased risk.

Nevertheless, it is possible for foreign investors or cross-border commuters to obtain mortgages in Germany at market rates even without a residence. With the right preparation and by working with financing experts specializing in foreign buyer situations, you will have access to suitable banks and lenders that will also finance the purchase of a property for foreign buyers.

Real estate financing for cross-border commuters is usually similarly complex, since not only cross-border income flows, but also different residence constellations must be taken into account when evaluating a borrower profile. Cross-border situations are always special cases, since they have mostly also need to account for different income and living conditions in several countries, and borrowers and lenders have to consider international documentation and tax circumstances. The situation of cross-border commuters must therefore be explained to German banks in the right way so that it can be assessed fairly. We have adapted our real estate financing solutions to specifically address the particularities of cross-border commuter situations.

Financing Cases

An investor from Australia, who was also resident there, wanted to invest in the Frankfurt real estate market. The challenge was to implement the property financing process as a non-resident for tax purposes and without a German credit history. His case was coordinated with banks that also offer loans to non-residents under certain conditions. A specialized lender offered a competitive financing solution that met the client's expectations and objectives.

A customer from the US wanted to purchase a second home in Munich. As a non-resident, he initially could not find a bank that was willing to provide financing. The challenge was that the bank estimated the purchase price of the home to be too high compared to the market value. The customer was unclear about the financing process in Germany and what implications his lack of residence and the determined difference in value would have on the financing. The purchase was finally settled through a bank that regularly offers loans to international customers in situations where the financial situation and the down payment meet certain requirements. The customer received a customized financing solution with reasonable conditions for his property purchase.

A Swiss citizen commuting from Switzerland to Germany was considering buying a property in Lörrach in the Swiss-German border region. The biggest challenge was explaining and assessing the client's changed tax situation as a result of the change of residence. This is because moving their main residence meant switching from the Swiss tax system with a low income tax rate to the German tax system with higher wage taxes. Therefore, the relationship between the loan installments and the customer's income had to be recalculated according to German tax laws, which reduced the affordability of the originally requested financing amount. With an adjusted loan amount, the financing could be completed and the purchase could be implemented.

A German national who commuted a long way to work in Basel every day was interested in buying a home in the German-Swiss border region to shorten his daily commute. The challenge was to obtain a loan commitment from German banks that would accept his income in a foreign currency, Swiss francs. The client's income made it possible to get a mortgage approved even under these special conditions, with a lender specializing in cross-border commuter situations. In addition, the client was able to take advantage of a special financing structure by taking out two loan tranches in euros and Swiss francs, thus benefiting from both refinancing markets.

FAQs

What options do foreign investors have for purchasing and financing real estate?

In Germany, foreigners have the same rights as German citizens with regard to the possibilities of purchasing real estate, thus ensuring fair treatment in real estate transactions. As a rule, it is possible to purchase real estate without major restrictions, although a German tax number is mandatory and a domestic bank account is advantageous. However, financing is generally more difficult for foreign investors to obtain than for German citizens, and the tax effects of an investment in Germany with a foreign residence can also vary. In addition to specialized financing advice, a tax review is also recommended before making a purchase.

Can a foreigner apply for a loan together with a person who is resident and a German citizen?

Foreigners can apply for a loan together with a German citizen, which can speed up the lending process and often also enable better financing conditions. A joint application can provide additional security for the bank and the foreigner benefits from the stronger financial situation and long-term residency status of the German citizen.

What should a foreigner do before applying for a German Mortgage?

Before applying for a mortgage, it is always recommended to research the specific loan requirements for non-residents for tax purposes and to gather the necessary financial documents and supporting information. Consulting with a mortgage professional who specializes in international situations and is familiar with the unique issues facing foreign nationals can expedite the process of identifying and understanding the options.

How can a foreigner take into account any exchange rate risk when taking out a loan?

There are various options for minimizing exchange rate risk. The foreign investor may consider taking out a loan in their home or income currency and using it for a purchase abroad or, if necessary, hedging part of the loan held in a foreign currency elsewhere. When taking out a loan in the local currency in which the property is purchased, it makes sense to open an account in the country and in that local currency in order to manage the loan more efficiently as part of the financing.

How long does it take for foreigners to get a mortgage and what are the steps involved?

The credit application process for a non-resident can take from a few days to several weeks, as the processing time depends on various factors such as the completeness of the application, the type of property and the lender's requirements regarding the borrower's situation. The stages of the loan application process include an affordability assessment of the financing, a property appraisal, the processing of the financing application and, finally, the approval of the financing and the conclusion of the contract.

How can cross-border commuters obtain real estate financing?

Cross-border commuters should be able to prove a sustainable income for a successful credit application. In some circumstances, additional documents may have to be provided for cross-border situations, such as proof of the tax-recognized cross-border commuter situation in the countries concerned, the number of days spent in each country, and other relevant tax returns. This enables potential lenders to better assess the applicant's situation when determining their sustainable income situation as part of the credit application.

How can cross-border commuters optimize their financing application in Germany?

For cross-border commuters, it is recommended that you prepare your documents well before applying for a loan, especially since more evidence is usually required than for a normal credit application. An applicant should demonstrate continuity of employment and other ties to Germany that may support the loan request. This includes, for example, previous or current long-term rental agreements for existing properties or existing real estate in Germany, which can also be used as additional collateral if necessary.

What do cross-border commuters into Switzerland need to bear in mind when applying for a loan in Germany?

Cross-border commuters who live in Germany and work in Switzerland should be aware of the exchange rate risks that may arise if their income is in Swiss francs and their living expenses are in euros. It is also important to understand that despite similarities, there are also significant differences between the two countries. This can be particularly relevant from a tax perspective.

What properties are available to cross-border commuters in the Swiss-German border region?

For cross-border commuters, the real estate markets near the German border, such as Constance, Lörrach or Friedrichshafen, are attractive because they are more accessible from the distances between home and work. A property purchase in these regions can offer lower acquisition costs and a lower cost of living compared to real estate prices in Switzerland, making them attractive to cross-border commuters.

Financing Process

The loan process at finbird for foreign investors and cross-border commuters begins with an initial consultation in which the client's goals and the specific real estate project, as well as the client's current situation, are discussed. We guide our clients through the entire loan application process with German banks and lenders. This includes checking the necessary formalities as part of the credit application, explaining the legal implications of German Mortgages and discussing aspects relevant to financing in connection with real estate ownership in Germany. We work with a network of lenders that have experience in handling mortgage requests and real estate financing for foreigners and cross-border commuters, and negotiate with several financing partners to ensure the most attractive financing conditions possible for our customers. Throughout the entire process, we maintain transparent communication to ensure that our customers are fully informed.