November 3, 2022, 4:45 am | Read time: 4 minutes
Anyone looking to purchase a property usually has to dig deep into their pockets. However, many homebuyers underestimate the additional costs, which make up a significant portion of the total expenses.
The prices for land, apartments, and houses are high–and that’s not all: Various additional costs also come with buying real estate. These include real estate transfer tax, notary and broker fees, and land registry entry. These costs can add up to more than ten percent of the purchase price. Buyers should not overlook this item in their calculations.
Additional Costs Continue to Rise
In general, the higher the purchase price, the higher the additional costs. According to data from the mortgage specialist Interhyp, the additional purchase costs averaged 14,000 euros in 2011.
Currently, they average 32,000 euros. “Buyers simply have to factor in these costs; they have little room to save on them,” says Mirjam Mohr from Interhyp.
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Largest Cost Factor: Real Estate Transfer Tax
The largest cost factor among the additional costs is the real estate transfer tax. “It ranges from 3.5 to 6.5 percent of the purchase price, depending on the federal state,” says Julia Wagner from the property owners’ association Haus & Grund Deutschland. While a relatively moderate 3.5 percent is due in Bavaria and Saxony, in Schleswig-Holstein, Brandenburg, Saarland, Thuringia, and North Rhine-Westphalia, you have to pay 6.5 percent. The other states fall somewhere in between.
“The real estate transfer tax is levied on the purchased land,” says Florian Becker, managing director of the Bauherren-Schutzbund in Berlin. A house built individually on it is not subject to this tax. “But anyone who buys a used house or acquires a house and land together from a developer must pay the real estate transfer tax on the entire purchase price.” For a purchase price of 500,000 euros and a tax rate of 6.5 percent, 32,500 euros are due for the real estate transfer tax alone.
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Brokerage Fee Amount and Distribution Offer Room for Maneuver
Other additional costs are also proportional to the property’s purchase price. Notary fees are set in the Court and Notary Fees Act. They amount to about 1.5 percent of the property’s purchase price. In addition, there are fees for entry in the land register. These are also uniformly regulated by law in Germany, amounting to 0.5 percent of the purchase price.
“In total, you have to calculate about two percent of the purchase price for notary and land registry entry,” says Julia Wagner. For a purchase price of 400,000 euros, that would be a total of 8,000 euros. “Anyone who also wants to have a mortgage entered in the land register must plan for another 0.5 percent of the loan amount,” says Florian Becker.
There is now some relief for buyers regarding the brokerage fee. Since the end of 2020, if the seller has commissioned the broker, they must pay at least half of the broker’s commission. For an agreed commission of 7 percent, at least 3.5 percent. The other 3.5 percent can be passed on to the buyer. However, the law only regulates the distribution of broker costs, not the amount of the commission. “So there is some room to save on additional costs here,” says Mirjam Mohr.
In addition to these classic additional purchase costs, real estate buyers should also keep an eye on various other costs that can arise before building a house. “Demolition work, soil surveys, tree felling, surveys, site setup, development work–all of this quickly adds up and becomes increasingly expensive given the ever-rising construction costs,” says Florian Becker.
Additional Costs Should Be Paid Out of Pocket
Few people have these additional purchase costs, amounting to many thousands of euros, readily available in their accounts. “Anyone looking to create homeownership should save up equity beforehand to at least cover these additional costs,” advises Mirjam Mohr. “It would be better to have an additional 20 percent of the purchase price as a reserve.”
There is also the option to include the additional purchase costs in the overall real estate financing. “In recent years, when interest rates were very low, banks sometimes financed the additional costs against interest surcharges,” says Florian Becker. But now, with rising mortgage rates, the calculation doesn’t work out for many.
“Financing without equity is only an option for people who are sure to earn a lot today and in the coming years but haven’t been able to save anything.” Everyone else will have to save the equity for the additional costs.
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