Temporary Residence Permit Holders

finbird advises international professionals with a temporary residence permit on their mortgage options.

The Temporary Residence Permit

finbird supports professionals with a temporary residence permit, e.g. for employment purposes, for research or for family reunification with obtaining mortgages for buying property in Germany. We provide comprehensive advice in English and specialize in customer situations with temporary residence status and a foreign background.

Mortgages With A Temporary Residence Permit

A temporary residence permit can be a permit to work or do research in Germany or be granted as a family reunification visa. As a rule, all these types of residence permits are issued to people from third countries who are in Germany for reasons such as work, study, academic careers or family reunification.

Work visa:

A work visa is a temporary permit tied to a specific employer or employment contract. Problems can arise if the employment relationship on which the residence permit was initially based is terminated while residing in Germany, meaning that an applicant's sustainable income for long-term servicing of loan installments is uncertain and an applicant may have to leave the country if no other employment is found. From a lender's point of view, this increases the risk that loan installments cannot be serviced sustainably. As part of the creditworthiness evaluation, further evidence and collateral may be required here.

Temporary residence permits for academic staff and researchers:

Research visas are issued to scientists and academics from third countries who are working in Germany on a research project or in academia. These temporary residence permits are also limited in time and usually tied to a specific research project or academic activity. The time limitation of research contracts, the frequent fluctuations in income and the short-term academic activities are often seen as a risk by lenders and can make it more difficult to obtain a mortgage.

Visa for family reunification:

The family reunification visa enables family members from third countries to join their spouses who already live in Germany. As a rule, those joining their partner are mostly spouses and children, and under certain conditions can also be other close relatives.

Challenges and opportunities:

The biggest factor in banks' lending decisions for people with temporary residence permits is the uncertainty regarding the duration of their stay in Germany and the long-term stability of their income to sustain loan payments over long periods. Banks are required by law to assess the risk of lending not only on the basis of current income, but also the long-term ability of the borrower to meet their payment obligations.

Mortgage financing for borrowers with a temporary residence permit often differs from that for individuals with a permanent residence permit because these borrowers are not standard cases and therefore require more expertise regarding the financing requirements of banks, as well as special communication and presentation of the situation to lenders. This includes an assessment of how the loan conditions change when the temporary permit is converted into a permanent permit or citizenship. It may also be an option to take out loans with a shorter fixed-interest period if they can later be refinanced at better conditions once the residence status has changed.

Some lenders specialize in offering real estate financing to borrowers with temporary residence permits under certain conditions. These types of mortgages may differ in their loan terms and the applicable down payments, financing conditions and documentation requirements. You should therefore work with an experienced financing advisor who can give you a clear overview of your options with a temporary residence permit.

Financing Cases

This case involved financing for a property purchase for a customer from the USA and his wife. The wife was in Germany on a temporary visa for family reunification. Since both incomes were required for the financing, the customers initially had difficulties obtaining a property financing due to the wife's temporary residence permit. By focusing on the stable income and employment situation of both borrowers, it was possible to demonstrate that the risk of the temporary permit not being extended was low. This convinced a lender who had experience with similar cases and approved a loan suitable for the situation.

A Hong Kong PhD student with a temporary residence permit wanted to invest in a home but couldn't find a bank that would grant the required loan amount. The main problem was the short duration of the temporary residence permit, which deterred lenders. The client's academic qualifications and the possibility of converting his temporary residency status into a permanent one in the near future were finally highlighted to potential lenders, resulting in an offer of reasonable mortgage terms.

An Australian client with a temporary permit to work in Germany had difficulties finding a lender that would approve his mortgage request based on his temporary residence status. By providing a comprehensive presentation of the client's qualifications and financial situation, contributing sufficient equity and positive future income forecasts, the case could be submitted to further specialized lenders for evaluation. The detailed presentation led to a specific financing offer from a specialized banking partner with acceptable conditions and an amortization schedule that met the client's preferences.

FAQs

How does a temporary residence permit affect real estate financing?

People with a temporary residence permit should be aware that their residence status often does not give them the same financing options as applicants with permanent residency. However, the likelihood of your residence permit being extended and having a stable income in Germany can have a positive effect on the approval of real estate financing and its conditions. Nevertheless, it often depends on the specific borrower situation and the home.

What is the difference between a temporary and a permanent residence permit?

A temporary permit does not allow a person to settle in Germany indefinitely, while a permanent permit allows unlimited settlement. Due to the higher risk, people living in Germany with a temporary residence permit may be subject to stricter financing requirements, such as only being able to take out smaller loans and having to put down more of their own equity. With specialized financial advice and access to the right lenders, you can get the right conditions for your situation, tailored to your temporary residence status.

How can you get a good credit rating with a temporary residence permit?

Persons with a temporary permit should ensure that the loan installments they apply for for financing are also affordable in the long term, e.g. by providing proof of a stable income and a good credit history. It is also advisable to collect and compile all the necessary documents early on in order to prove long-term intention and ability to reside. In addition, current proof of income is also usually required.

How does a temporary residence permit affect the approval of a real estate financing?

Banks often take a conservative approach when evaluating potential borrowers with temporary residence, which results in lower loan approval rates than for those with permanent residency. Demonstrating a high level of qualifications, a solid financial situation, a stable job and a high level of equity can increase the chances of loan approval.

How can people with temporary residence status prepare for a successful mortgage request?

Persons with a temporary residence permit should first find out about the conditions associated with their temporary residency status. If you can convert your residence permit into a permanent residence permit, it is advisable to create the conditions for this early on (in particular, the necessary knowledge of German). This also includes building up a positive credit history, demonstrating a stable income and saving for a larger equity share at an early stage in order to increase the chances of a positive credit decision.

What applies to British citizens with a temporary residence permit in relation to Brexit?

It is important for UK citizens who wish to apply for a mortgage to be aware of the differences and changes in the regulations before and after Brexit, as the UK left the European Union in 2021. Here, improved conditions apply to people who were already in Germany before 2020, and often different conditions apply to British citizens who only came to Germany after Brexit. These differences may affect the approval and conditions of real estate financing.

What happens to my home if my temporary residence permit expires and I leave the country?

Temporary residents with a temporary residence permit may want to consider selling their property if they are leaving Germany, or how they will continue to make their loan payments, e.g. by renting out their home. In such cases, it is advisable to contact your financial advisor to discuss all the relevant options.

How can credit terms for real estate financing be improved?

In order to obtain good financing conditions with a temporary permit, you must be able to demonstrate a long-term intention to remain in Germany, e.g. by showing an intention to convert the temporary residency permit into a permanent one, such as a permanent residence permit or German citizenship. Proving that you have a higher equity reserve can help you to successfully obtain a loan approval for real estate financing with a temporary residence permit.

Can I refinance a loan if my temporary residence status has been converted to a permanent residence permit?

Persons with a temporary residence permit can refinance a loan at possibly better conditions if they opt for a loan with a shorter fixed-interest period when taking out the loan. If your temporary residence status has changed to a permanent residence permit by the time of refinancing, you will often be able to choose from a wider range of offers and available banks, e.g. banks that only finance people with a permanent or unlimited residence permit. It is advisable to check the specific conditions of different scenarios and to clarify with your financing advisor when such a financing structure and refinancing option makes sense.

Financing Process

The process at finbird for customers with temporary residence status first involves a comprehensive assessment of your situation. We take into account the type and impact of your temporary residence status on your financing options, the length of your stay to date, your options for converting your temporary permit into a permanent one, the type of employment you have and your marital status. This enables us to determine the most suitable real estate financing products for you as part of our consultation. We help you gather the required documentation, communicate with lenders and banks, and negotiate the terms for your specific situation. Our goal is to find a financing solution that suits our clients' current situation but also takes into account their future plans and preferences. We are aware of the hurdles faced by borrowers with a temporary residence permit when trying to obtain real estate financing. That is why we make our process as smooth and understandable as possible.