# Eigenkapital

> Equity - own capital invested in a property purchase

Canonical: https://www.investbud.de/en/glossary/eigenkapital
Last updated: 2026-10-28

Eigenkapital (equity) is the investor's own capital used for a property purchase. According to the Verbraucherzentrale, banks often require 20 percent of the total costs (purchase price plus Nebenkosten) from your own funds. Borrowers who bring little or no equity pay higher interest rates and tend to need longer to repay the loan.

For a €300,000 property in NRW with €34,710 Nebenkosten (11.57%: Grunderwerbsteuer 6.5%, notary 1.0%, land registry 0.5%, broker 3.57%), the total cost is €334,710. 20% of that is €66,942 Eigenkapital.

Eigenkapital, or equity capital, is the foundation of every real estate investment in Germany. The amount of equity you bring to a transaction affects whether you qualify for financing, the interest rate you receive, your monthly cashflow, and the overall risk profile of your investment. Strategic equity planning is essential for building a sustainable property portfolio.

Practical Example: Eigenkapital Planning for a Property Purchase: You want to purchase a €280,000 apartment in Hannover. Nebenkosten (10.07%: Grunderwerbsteuer Niedersachsen 5.0%, notary 1.0%, land registry 0.5%, broker 3.57%): €28,196. Suppose your bank offers its best rate from a 25% down payment. Down payment: €280,000 × 25% = €70,000. Plus Nebenkosten: €28,196. Total Eigenkapital needed: €98,196. With €130,000 in savings, you have €31,804 remaining as a reserve after the purchase. Compare this to a 20% down payment scenario: Down payment: €56,000. Plus Nebenkosten: €28,196. Total Eigenkapital: €84,196. Remaining reserve: €45,804, more buffer, but the bank charges a 0.2% higher interest rate. On a €224,000 loan, this 0.2% premium costs about €448 in the first year, or roughly €4,480 over 10 years if you ignore repayment. The choice between a larger reserve and a better rate depends on your personal risk assessment.

## Eigenkapital Requirements for German Investment Properties

German banks set their own equity requirements, and they vary by bank and borrower. The Verbraucherzentrale names 20 percent of the total costs from own funds as a common bank requirement. Total costs include the Nebenkosten: Grunderwerbsteuer (3.5 to 6.5% depending on the state), notary and land registry (together about 1 to 1.5%) and, if a broker is involved, the buyer's share of the commission. For apartments and single-family houses the buyer pays at most half (§ 656c BGB) of a total commission that is usually 5.95 to 7.14% including VAT.

- Nebenkosten: about 4.5 to 11.6% of the purchase price, depending on the state and whether a broker is involved
- Common bank requirement (Verbraucherzentrale): 20% of total costs from own funds
- Example: €300,000 price + €34,710 Nebenkosten = €334,710 total cost; 20% = €66,942
- Little or no equity: higher interest rates and a longer path to being debt-free (Verbraucherzentrale)

## Sources of Eigenkapital for Property Investment

Building sufficient Eigenkapital is often the biggest hurdle for aspiring real estate investors in Germany. Several sources of equity can shorten the timeline to your first (or next) property purchase, and each has implications for your investment structure.

- Personal savings: The most straightforward source
- Existing property equity: Banks may accept equity in other properties as additional collateral (Zusatzsicherheit)
- Bausparvertrag (building savings contract): Savings contract that leads to a building loan once allocated
- Retirement savings contracts: According to the Verbraucherzentrale, these also count as equity
- Family loans or gifts: Common in Germany, but banks may require documentation of the source

## The Eigenkapital-Return Trade-Off

One of the most important strategic decisions for real estate investors is how much Eigenkapital to deploy per property. More equity means lower risk, better financing terms, and stronger cashflow, but it also means fewer properties per unit of capital and lower return on equity through reduced leverage. Understanding this trade-off is critical for optimizing your portfolio strategy.

- More equity = better interest rate, lower monthly payment, higher cashflow, and lower risk
- Less equity = higher leverage, potentially higher ROI on equity, but higher risk and payments
- With €200,000 in savings: one property with 40% down OR two properties with 20% down (different risk/return profiles)
- The optimal equity level depends on your risk tolerance, income stability, and investment timeline

## Practical Tips

- Ask lenders for offers at several equity levels and compare the interest saved with the capital you tie up. A rate that is 0.2 points lower on €224,000 saves about €448 in the first year.
- Keep a liquidity reserve beyond your Eigenkapital commitment for unexpected costs, vacancies, or special assessments. Do not invest your last euro as equity, as this leaves no room for setbacks.

## Frequently Asked Questions

### Can I use a family gift as Eigenkapital for a property purchase?

Yes, family gifts are a common and accepted source of Eigenkapital in Germany. Banks will require documentation proving the source of funds, typically a gift letter (Schenkungserklärung) and bank statements showing the transfer. Be aware that gifts above certain thresholds are subject to German gift tax (Schenkungsteuer): the tax-free allowance is €500,000 between spouses, €400,000 from parents to children, and €200,000 from grandparents to grandchildren (§ 16 ErbStG). Gifts from the same person within 10 years are added together (§ 14 ErbStG). Gifts that remain below these thresholds are tax-free.

### Is it possible to buy an investment property with no Eigenkapital in Germany?

Banks decide this case by case. The Verbraucherzentrale names 20% of total costs from own funds as a common bank requirement and notes that borrowers with no or little equity pay higher interest rates and need longer to become debt-free. Even if a bank finances the full purchase price, the Nebenkosten (about 4.5 to 11.6% of the price) still have to be paid, so plan for them from your own funds.

### How does Eigenkapital affect my mortgage interest rate in Germany?

Eigenkapital has a direct impact on your mortgage interest rate: according to the Verbraucherzentrale, borrowers with little equity pay higher rates. Banks price by the loan-to-value ratio (LTV), but where each bank sets its tiers and how large the steps are differs from bank to bank. You can measure the effect yourself: if a bank offers 3.5% at a lower equity level and 3.1% at a higher one, the 0.4 point difference on a €200,000 loan is €800 in interest in the first year. The optimal strategy balances the improved rate against the opportunity cost of deploying more capital.