Property financing without equity for young families: A guide
9 Jun 2025
6
Minutes
Katrin Straub
CEO at nextsure
The desire for their own home is strong, but savings are depleted. For many young families, financing a home without equity seems to be the only way to move into their own home. This article explains how so-called full financing can work, which conditions you need to meet, and how to minimize the risks.
The topic in brief and concise terms
A mortgage without equity (full financing) covers the purchase price and additional costs, but leads to higher interest rates and stricter credit requirements.
Requirements include a high, secure income, an excellent SCHUFA report, and often a second borrower.
Taking out life and disability insurance is essential to protect your family from financial risks.
Understanding Full Financing: The 110 Percent Solution
A construction financing without equity means that the bank finances the entire purchase price plus additional costs. These additional costs can amount to up to 15 per cent of the purchase price depending on the federal state. This is often referred to as 110 per cent financing. For banks, this poses an increased risk, which is why they thoroughly examine the financial situation of the applicants. An interest surcharge of up to one percentage point compared to financing with equity is common. This model is primarily intended for young families who have a high, secure income but have not yet been able to build up significant reserves. The exact conditions for such financing are crucial for the success of the project.
Check requirements: Who qualifies for the loan?
Banks grant full financing only under strict conditions to minimise their risk of default. An excellent credit rating, evidenced by a SCHUFA score of over 97 percent, is a basic requirement. In addition, an above-average and stable household income is expected; having civil servant status or an unnoticeable position are ideal circumstances here. Many institutions require two partners to sign the credit agreement, to spread the risk over two incomes. Young applicants under 40 years of age are preferred, as they have a long remaining working life ahead of them. A detailed household calculation is essential to demonstrate the long-term affordability of the repayments. Meeting these criteria is the first step on the way to obtaining financing approval.
Calculating costs: More than just the purchase price
The total cost of buying a house goes far beyond the mere property price. The additional purchase costs are a significant factor that must be financed when taking out a full mortgage. These consist of several items that vary depending on the region and purchase price. An accurate calculation is crucial for the real estate loan without equity.
Here is a list of typical additional costs:
Property transfer tax: Depending on the federal state, this is between 3.5 and 6.5 percent of the purchase price.
Notary and land registry costs: Around 1.5 to two percent are incurred for notarizing the purchase contract and registering it in the land registry.
Brokerage fee: If a broker is involved, the buyer and seller share the fee, with the buyer's share often being about 3.57 percent.
Potential surveyor costs: Costs for a valuation survey can range from 500 to 1,000 euros.
With a purchase price of 400,000 euros, these additional costs can quickly reach a total of 40,000 to 60,000 euros. These extra costs must be taken into account when planning the financing amount to realistically assess the financial burden.
Securing risks: Foundation for the family's future
Such a significant financial commitment as a mortgage without equity requires comprehensive family protection. The loss of income due to death or disability can jeopardize the entire financing. Therefore, banks often require the conclusion of specific insurances as loan security. A term life insurance is often a condition for granting the loan.
Two types of insurance are crucial in this context:
Term life insurance: This protects the family in the event of the main earner's death. The sum insured should at least cover the loan amount so that the survivors can repay the loan and do not have to sell the house.
Disability insurance: This comes into play if a borrower can no longer pursue their profession due to health reasons. It pays a monthly pension that helps to continue servicing the loan payments and maintain the standard of living.
Taking out a term life insurance is often relatively affordable for young people. These protections are not a trivial matter, but an essential component for a secure future in your own home.
Make use of government support: Check grants for families
Young families can, under certain circumstances, access government subsidies to reduce the financial burden. The Kreditanstalt für Wiederaufbau (KfW) offers special programmes. The "Home Ownership for Families" programme (300) provides low-interest loans to families that do not exceed certain income limits and build or buy in an environmentally friendly manner. For a family with one child, the income limit is set at a taxable annual income of 90,000 euros. This limit increases by 10,000 euros for each additional child. The maximum loan amounts can reach up to 270,000 euros, depending on the level of subsidy and the number of children. While these subsidies cannot replace equity, they can significantly lower the monthly burden through reduced interest rates. Therefore, an early assessment of eligibility requirements is an important step in financial planning.
Long-term planning: Keep an eye on follow-up financing
A mortgage is a marathon, not a sprint, often lasting over 30 years. The initial fixed interest rate period typically ends after ten or 15 years. At this point, there is usually a considerable remaining debt, for which a follow-up financing is required. The interest rate change risk is the greatest danger here. If interest rates have risen by then, the monthly payment for the remaining loan can be significantly higher. With full financing, the remaining debt after the first phase is particularly high, further exacerbating the interest rate risk. Therefore, it is advisable to make special repayments during the initial term to reduce the remaining debt as much as possible. Forward planning helps to secure the second financing phase as well.
Request an individual risk analysis now: Have your insurance situation reviewed for free and receive specific optimisation suggestions.
More useful links
The Deutsche Bundesbank provides a detailed report on the current development of the real estate market in Germany.
Wikipedia offers a comprehensive overview of the topic of construction financing.
The Deutsche Institut für Wirtschaftsforschung (DIW) provides research findings and analyses on the German real estate market.
FAQ
What requirements must I meet for a home loan without equity?
You need an excellent credit rating (high SCHUFA score), an above-average and secure income (e.g., as a civil servant or in a permanent position), ideally a second borrower, and should be younger than 40 years.
What are the risks of full financing?
The main risks are higher interest rates, a longer loan term, and a higher monthly burden. Additionally, there is a high risk of interest rate changes during refinancing, and in the case of a distressed sale of the property, a residual debt may remain.
Which insurances are important in financing without equity?
A term life insurance is essential and is often required by banks to secure the loan in the event of death. An occupational disability insurance protects you and your family from the financial consequences of a loss of income due to illness or accident.
Are there government incentives for young families?
Yes, the KfW programme "Home Ownership for Families" (300) offers low-interest loans for families who meet certain income limits and build or buy climate-friendly properties. This can reduce financing costs.
What are additional purchase costs and how high are they?
The incidental purchase costs include the land transfer tax (3.5% - 6.5%), notary and land registry fees (approx. 2%), as well as any potential broker fees (approx. 3.57%). Overall, you should expect around 10 to 15 percent of the purchase price.
What happens after the fixed interest rate period ends?
After the fixed interest period ends (usually 10 or 15 years), a remaining debt remains for which you will need follow-up financing. If interest rates have risen by then, your new monthly payment may be higher.
