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Buying a house without equity?

Buying a house without equity is a decision that must be carefully considered. It is a step that involves some risks, but also offers potential financial rewards. However, before you decide to go down this route, it is important to weigh up the pros and cons carefully and find out about the various options available to you.

What counts as equity capital?

Equity refers to financial resources that a person contributes to the purchase of a property without resorting to loans. It can come from cash, savings, personal contributions, increases in the value of existing properties, gifts, inheritances, or the sale of other assets.

Equity is therefore the money that you personally invest in a property before taking out a loan. It serves as security for the lender and demonstrates your financial strength and ability to repay the loan. A lack of equity means that you have little or no money to invest in the property, which increases the risks and makes it more difficult to obtain financing.

Possible options.

  • 100% financing: There are various ways to buy a house without any equity. One option is 100% financing, where the entire purchase price of the house is covered by a loan.

This type of financing can be offered by various lenders such as banks or mortgage brokers. However, it is important to note that such financing is usually only available under certain conditions, such as a very good credit rating and stable income. In addition, the interest rates for 100% financing may be higher than for a conventional loan with equity, as the risks for the lender are higher.

  • Government subsidy programs: Another option is to take advantage of government subsidy programs that are specifically designed to make it easier for people without equity to buy a home.

These programs can take various forms, such as low-interest loans, down payment assistance, or tax breaks. The conditions and criteria for participating in such programs may vary depending on the country and region. It is therefore advisable to check with your local authorities or financial institutions to find out what support is available and whether you are eligible for these programs.

  • Private lenders or investors: In addition, you may be able to find a private lender or investor who is willing to provide the equity for the home purchase.

This can take the form of a private loan or an equity stake in the home. Private lenders or investors are often more flexible than traditional financial institutions and can make individual arrangements that are beneficial to both parties. However, it is important to carefully review all legal and financial aspects and to make clear agreements to avoid misunderstandings or disputes.

Risk and opportunity assessment.

Buying a house without equity naturally involves risks. High levels of debt can lead to financial burdens and restrict your financial flexibility. In addition, with 100% financing, you may have to pay higher interest rates, which increases the overall cost of buying a house. There is also the risk that the value of the property will fall and you may end up with more debt than the house is worth.

Despite the risks, buying a home without equity can also offer opportunities. It allows people who do not have sufficient savings to realize their dream of owning their own home. Especially in times of low interest rates and rising property prices, buying a property without equity can be attractive, as the monthly payments may be lower than the rent for a comparable apartment.

Get professional advice.

Before deciding to buy a home without equity, it is important to seek professional advice from financial experts. They can help you assess your individual situation, explore the various options, and weigh the risks and opportunities. This will enable you to make an informed decision that is in line with your financial goals and risk tolerance.

My database contains many properties that could become your new home.

I place great importance on understanding the individual needs and wishes of my clients. I conduct detailed consultations to gain a clear understanding of their ideas for their home and to develop a clear plan together.

I then support my clients in their search for the ideal location. In doing so, I take important factors such as location, infrastructure, surroundings, and future prospects into account. My goal is for our clients to not only get a house, but a real home that meets their individual needs and expectations and where they feel completely at ease.

Frequently asked questions

Frequently asked questions from my customers.

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How much equity do I need to finance an existing home?

The equity required to purchase an existing home depends on various factors, including the purchase price, financing terms, and the individual requirements of the lender. However, as a rule, equity of around 20% of the purchase price is recommended in order to obtain favorable financing.

You can calculate the impact of the amount of equity on your financing using the Dr. Klein mortgage calculator on my website under Financing.

How long is the term of a home loan?

The term of your home loan depends on various factors such as the amount of the monthly installment, the loan amount, and any special repayments. However, you can choose the fixed interest period yourself. Since the beginning of 2022, interest rates had risen steadily, but we have been seeing interest rate cuts again for several months now. Dr. Klein, my partner for real estate financing, expects a sideways movement in the first half of 2025. Therefore, I recommend a shorter fixed interest rate at this point in time.

You can find the Dr. Klein construction loan calculator on my website under Financing. Here you can calculate daily construction loan rates, monthly installments, and total costs.

How high should the annuity for home financing be?

The annuity should not exceed 35% of your net household income. This will give you sufficient leeway for other daily expenses and living costs.

You can calculate the amount of your personal annuity using the Dr. Klein mortgage calculator on my website under Financing.

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MATTHIAS PFEIFER

Immobilienmakler | PMA® Geprüfter Immobilienbewerter für Wohnimmobilien

+49 (0)176 3444 4447 matthias@pfeifer-immobilien.de

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