KfW promotes the construction, purchase or renovation of real estate with favorable loans and grants. An overview of the most important funding options.
Published on 27. Oct. 2020
The Kreditanstalt fur Wiederaufbau (KfW) promotes the purchase of residential property with various loans and grants. With the right KfW subsidy, you can save a lot of money when buying real estate. We show you what KfW subsidies are available and what conditions apply.
- How KfW funding works?
- KfW loans and grants for existing properties and new buildings
- KfW home ownership program (124)
- Building subsidy (424)
- Residential building – loan (261, 262)
- How to apply for KfW funding?
- Can I cancel a KfW loan?
- Are unscheduled repayments possible with KfW loans?
- KfW grants: a good option for your construction financing
- How does the KfW subsidy work?
- KfW loans and grants for existing properties and new buildings
- KfW home ownership program (124)
- Building subsidy (424)
- Residential building – credit (261, 262)
- How to apply for KfW funding?
- Can I cancel a KfW loan?
- Are unscheduled repayments possible with KfW loans??
- KfW grants: a good option for your construction financing
How does KfW funding work??
KfW is a state-owned development bank. It supports citizens as well as municipal companies and public institutions with a variety of support programs.
KfW funding consists of loans and grants. Builders and buyers can combine their construction financing with various subsidized loans with very favorable interest rates and thus save several thousand euros. In addition, KfW also offers grants for specific purposes that do not have to be repaid.
The loans under the KfW subsidy are usually more favorable than normal construction financing. With the low-interest loans, the federal government wants to create incentives, for example, for particularly sustainable construction or age-appropriate conversion measures.
Another big advantage is that the KfW subsidy cannot only be combined with normal construction financing. The various subsidy programs can also be combined with each other. You can benefit from the low-interest loans in several ways.
Our financing experts will be happy to explain to you in a personal consultation which programs make sense for you and how, if necessary, several subsidy programs can be combined with each other.
KfW loans and grants for existing properties and new buildings
Below we show you the most important KfW subsidies for existing properties and new buildings. We explain the conditions and what is subsidized.
KfW Home Ownership Program (124)
With this loan, KfW supports you on your way to owning your own home. It is important that you live in the property yourself and do not rent it out.
The good thing about a KfW loan is that the banks often improve their conditions when your construction financing is combined with this KfW loan. Another advantage is the low interest rates. In addition, Program 124 can also be combined with other KfW subsidies.
The funding conditions
There are two different forms of financing with this funding: either an annuity loan or a bullet loan (also called an interest payment loan). With an annuity loan, you pay the same monthly annuity after the grace period (d.h. Interest and Repayment). With a bullet loan, you pay back only the interest during the entire term and the entire loan amount at the end in one sum.
Since the annuity loan is the standard case, we explain the conditions in more detail here:
Effective annual interest rate: from 3.28 % %. The interest rate depends on the length of the fixed-interest period (5 or 10 years).
The loan can be drawn down either in a lump sum or in installments within 12 months of approval. If required, the period can be extended to up to 36 months, but from the 13. monthly commitment interest of 0.15% per month on the amount of the loan that has not yet been drawn down.
Early repayment of the entire outstanding loan amount is possible – subject to payment of an early repayment penalty. Unscheduled repayments of part of the outstanding loan amount are not possible.
What is subsidized?
For existing properties, the loan can cover the purchase price, costs for repairs, modernizations and ancillary purchase costs such as notary and broker fees and land transfer tax.
In the case of a new building, the costs include the cost of the building plot, construction costs such as material and labor costs, costs for the architect, the energy consultant, notary and broker fees and land transfer tax, as well as costs for outdoor facilities.
Building subsidy (424)
The "Baukindergeld" is a subsidy for the first-time purchase or construction of owner-occupied residential property for families and single parents with children in the form of a grant.
The requirements for the Baukindergeld are very strict. According to KfW, families with children and single parents who meet the following requirements are eligible for funding
There are children under the age of 18 in the household for whom you or your partner receive child benefit.
The signed, notarized purchase contract or the building permit must be received between 01.01.2018 and the 31.03.2021 dated.
The new home is your only residential property in Germany.
The maximum household income is 90.000 Euro per year for one child plus 15.000 euros for each additional child.
The new house or apartment is located in Germany. Your nationality does not matter.
The amount of the building allowance depends on the number of children and the maximum household income. The following table explains how much the building subsidy is.
Please note: The subsidy is currently expiring. The last day on which families and single parents can apply for building subsidies is the 31st day of the month. December 2023.
If you want to learn more about the Baukindergeld, we recommend our detailed article "Baukindergeld: Support for property owners with children".
Residential building – loan (261, 262)
This loan supports the renovation, new construction or purchase of a new or newly renovated efficiency house as well as individual energy efficiency measures in existing real estate.
The conditions
As with the 124 program, there are two types of financing: the annuity loan and the bullet loan. We have already explained the difference between the two types of loans, so let's get straight to the conditions.
Effective annual interest rate: from 0.51. The interest rate depends on the term of the mortgage and the grace period.
Loan amount and repayment subsidy
The amount of the loan and the repayment subsidy depends on what is to be subsidized. KfW distinguishes between a) the construction and purchase of a new efficiency house, b) the renovation of existing properties into an efficiency house, and c) individual energy efficiency measures on existing properties.
Let's take a look at these special subsidies.
a) Construction and purchase of a new efficiency house
The maximum amount of this loan you can take out for an efficiency house depends on how energy efficient your new construction is and how high the eligible costs are. If you achieve efficiency house levels 40 or 55, your project will be financed with a loan amount of up to 120.000 per residential unit.
The maximum loan amount increases to 150.000 per residential unit if the property also meets the criteria for a renewable energy class or sustainability class or achieves Efficiency House 40 Plus.
You can save a lot of money with the repayment subsidy, because it reduces the amount you have to repay on your loan and thus also shortens the term of the loan. This means that you do not have to pay back the entire amount. The better the efficiency house level of your new property is, the higher the repayment subsidy is. The maximum repayment subsidy is 37.500 euros per housing unit.
b) Renovation of existing real estate to an efficiency house
As in the case above, the amount of the loan depends on how energy efficient your modernized property is and how high the eligible costs are. If you achieve an efficiency house level, KfW will support your project with a loan amount of up to 120.000 euros per housing unit.
The maximum loan amount increases to 150.000 euros per housing unit if the property also meets the criteria for a renewable energy class. And the maximum repayment subsidy is 75.000 euros per housing unit.
c) Individual energy efficiency measures for existing properties
As in cases a) and b), the amount of the loan depends on how high the eligible costs are. You receive a maximum of 60.000 euros as a loan per housing unit and calendar year for energy-efficiency measures.
The amount of the repayment subsidy is 20 percent and is granted for the following measures:
Insulation of walls, roof surfaces, basement and floor ceilings Installation or replacement of windows and exterior doors Installation or replacement of summer thermal insulation
Installation of digital systems that optimize energy consumption or make technical systems intelligently controllable
For heating measures, the better the measure, the higher the repayment subsidy, which ranges from 20 to 40 percent. If, for example, you replace an oil heating system with a heating system based on renewable energies, you will receive a higher repayment subsidy, which can be up to 50 percent depending on the new type of heating system.
How to apply for KfW funding?
The KfW loan is not applied for directly at KfW, but always via the "on-lending bank". Most major German commercial banks that offer construction financing cooperate with KfW. This means that you not only take out the main loan to finance your desired property with the financing bank, but also the appropriate KfW loan.
The KfW loan is usually secured by the land register, as is the main financing. However, in this case it is not KfW that is entered as creditor, but the on-lending bank. Because this is liable to KfW for your solvency. The main loan comes first in the ranking, because it usually has a higher remaining debt. The KfW loan is therefore secured on a subordinate basis. In the end, therefore, there are two loans in the land register:
The main loan, usually an annuity loan, creditor: the on-lending bank.
The KfW loan, usually also an annuity loan, creditor: also the on-lending bank.
Can I cancel a KfW loan?
You can cancel your KfW loan at any time. However, the termination is subject to conditions that depend on how long your KfW loan has already been running.
If the KfW loan has been running for less than 10 years: If the term of your loan is less than 10 years, KfW will charge an early repayment penalty. The amount of the early repayment fee is determined by the bank through which the KfW loan was applied for at the time. You then pay the outstanding balance and the early repayment penalty to KfW.
If the KfW loan runs longer than 10 years: You can cancel a KfW loan that runs longer than 10 years at any time with six months' notice free of charge. In this case, the statutory special right of termination pursuant to Section 489 of the German Civil Code (BGB) applies.
In times of low interest rates, it is also worth choosing a long fixed-interest period for KfW loans so as not to be exposed to any risk of interest rate changes. If, contrary to expectations, interest rates continue to fall during the term of the loan, the special right of termination takes effect after 10 years. For KfW loans that have been in existence for less than 10 years, it is worth checking the costs in such a situation. If the prepayment penalty is lower than the interest savings of the new loan, it also makes sense to change the interest rate in this case.
Are unscheduled repayments possible with KfW loans??
KfW offers unscheduled repayments on its KfW loans only to a very limited extent and usually charges an early repayment fee for unscheduled repayments. The exact amount of the early repayment penalty is communicated to you by the on-lending bank through which you once applied for the KfW loan.
KfW grants: a good option for your construction financing
If you use KfW funding, you can save a lot of money. Regardless of whether you are planning a new building or want to buy an existing property, you will almost certainly find a KfW subsidy that will support you in your project. Especially when it comes to energy efficiency.
Our financing experts will be happy to help you find the right KfW subsidy for you in a personal consultation. It is best to make an appointment now.