The dream of owning a home is an important life goal for many, but financing it is often a challenge. How much you have to earn gross to be able to afford a property depends on several factors: the property price, the amount of equity, the financing costs (such as interest rate and repayment) and the monthly cost of living. Nevertheless, there are a few rules of thumb that can provide some guidance.
1. the equity ratio
Equity is an important factor in real estate financing. Banks generally recommend at least 20% equity. This reduces the loan amount and therefore the financial risk. For a property price of 400,000 euros, around 80,000 euros should therefore be available as equity. More equity often leads to better loan conditions, as the bank considers the risk to be lower. So if you have saved more, you may be able to negotiate more favorable financing.
2. the load ratio
One of the first checks when approving a loan is the so-called burden ratio. Banks stipulate that the monthly loan installment should not exceed around 30-35% of the monthly net income in order to ensure financial stability. This means that around one third of the household income (after deduction of taxes, insurance and living expenses) can be set aside for real estate financing.
Example: With a net income of 4,500 euros, a maximum monthly installment of around 1,500 euros would be realistic. This also leaves room for other ongoing expenses and unforeseen costs.
3. the necessary gross earnings as a guide
If we consider a property worth 400,000 euros (this price varies greatly depending on the region), a loan installment of around 1,500 euros provides an orientation for the required income:
- A monthly net income of at least EUR 4,500 is required, which corresponds to gross earnings of around EUR 7,000 per month (at the German tax rate and without children).
- This amount corresponds to a gross annual income of approx. 84,000 euros.
The lower the property price, the lower the necessary income.
Sample calculation
For more precise orientation, here is an example calculation for a property worth 400,000 euros:
- Equity: 80,000 euros (corresponds to 20 % of the purchase price)
- Financing requirement: 320,000 euros
- Interest and repayment: At an interest rate of 4% (depending on the market situation), the annual charge is approx. 4% of the loan amount
- Monthly installment: around 1,300 euros
In order to be able to finance this monthly installment of 1,300 euros, the net household income should be around 4,000-4,500 euros, which corresponds to a monthly gross income of around 6,500-7,000 euros. The exact amount may vary depending on the tax bracket, number of children and individual factors.
Other factors influencing financing
The individual financial situation and the location of the property play a key role. The important factors include:
- Regional differences: Real estate prices are often much higher in large cities such as Munich or Hamburg than in rural areas.
- Interest rate: The interest rate varies with market conditions and has a significant impact on the monthly installments. Lower interest rates reduce the costs noticeably.
- Cost of living: The higher the current expenditure on living expenses and other loans, the lower the financial resilience.
- Additional costs: Notary fees, land transfer tax and estate agent’s commission increase the total cost of buying a property.
Conclusion
Anyone planning to buy their own home should prepare well and draw up a financing plan. Having a solid equity base, a realistic calculation of the mortgage rate and taking regional price differences into account are important steps on the way to financing your own home. The team of FOCUS real estate agents will be happy to assist you and support you with our extensive network in finding a financing solution tailored to your needs.