Mortgage lending - Ratgeber zur Annuity loan

Mortgage lending - Ratgeber zur Annuity loan

The annuity loan is not without reason among the classic forms of mortgage lending , because borrowers benefit from a longer-term planning and interest rate security. Especially in times of low interest rates, which have already been available on the market for a long time, a longer interest rate fixing is worthwhile, at least at first glance. However, many borrowers act incorrectly in these times, squinting only at the low monthly rate , but completely disregarding the repayment of the loan.

In this paper we explain the basic scheme of an annuity loan and indicate typical errors.

Higher Repayment Share Benefits

The Annuity Loan is designed so that the monthly installment of the loan always remains the same. It consists of a repayment and interest portion, with interest being reduced as the repayment proceeds. We would like to clarify this with the following example:

  • The loan amount is 120,000 euros, the repayment is set to one percent. At the beginning, the monthly repayment is therefore 100 euros, with an interest rate of five percent will initially be incurred 500 euros in interest. After the first month, the remaining debt amounts to 119,900 euros, after the second month, however, 119,799.58 euros. With 25 years fixed interest rate , a constant loan rate of 600 euros and a repayment of one percent, almost 36 years are needed until full repayment. In total, you paid 120,449.03 euros in interest, which is more than the original loan amount.
  • If, on the other hand, we put in two percent repayment, the rate increases marginally by 100 euros, while the interest charge over the term falls by almost the same amount 29,000 euros. In addition, the loan is already repaid after about 25 years. With three percent repayments, we come to 800 euros loan rate, the total interest burden drops by another 22,000 euros.

With a 300 euros increased loan rate, a fixed interest rate of 25 years and a borrowing rate of 5.00 percent, the loan is already 15 Redeemed years ago and reduced the interest burden by 51,000 euros. For more information on the topic, such as a model calculation based on your own values, see Immobilienscout24.

What to do next

  • You are certainly at some risk if you have the interest rate set for 20 years or even 25 years. However, the risk of receiving a higher rate of interest on a refinance than current is massively increased due to the historic low-interest rate phase.
  • Also keep in mind that this loan installment still leaves you the opportunity to make special repayments. If, for example, you repay $ 2,000 a year, your term will continue to decrease and your interest burden will decrease.
  • Experts recommend spending no more than 2/3 of the available household disposable income on mortgage lending. Therefore, you can calculate the financial framework, always keeping an eye on the initial amortization, as the low interest rates may give you an opportunity to contribute already.
  • Also plan iron reserves for the maintenance of the Property, especially when buying old buildings or houses in need of renovation. One calculates here with a expenditure of two euro per square meter, which one should set aside monthly. Under certain circumstances, there is also the opportunity, with a government subsidy or a low-interest loan from the KfW banking group, to carry out the reorganization.


Unlike a bullet loan, which is increasingly used by borrowers, the annuity loan guarantees high security and transparency . In the case of a term loan, only the interest portion is paid over the term, the repayment takes place at a later date. This carries the enormous risk of interest rate increases, which are more than likely due to the current market situation. This form of loan is therefore only recommendable if the time until the allocation of a building savings contract has to be bridged, but not as a traditional home loan.

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