QUESTION CLIENT: Good Morning, I am writing because I’m interested in purchasing an investment property in Germany, and would like to know whether I would be likely to qualify for a mortgage given my non-EU income and other factors. What is the maximum expected LTV (Lone To Value). Property specifics: New developement in Berlin, 124sqm & €769.000 purchase price.
ANSWER OBN: Here are two steps you need to follow to roughly determine the expected LTV or amount loan that can be granted.
STEP 1: Net rent must cover a mortgage yearly annuity of 5%. We assume a rent of €17 per sqm. According to your example (124sqm) you can expect a rent of €2.108 per month.
Devide the result by 0.05 (5%) then multiply by 12 (12 months). – Expected Loan = €505.920 – LTV = €505.920 ÷ €769.000 = 65.79%
STEP 2: Do you have further investments in Germany? If NO, then STEP 1 is your result. If YES, then all results in STEP 1 will have to be reduced should the loan repayment on the existing investment be higher than the rental income.