Mortgage financing without a deposit for young families: A guide
09/06/2025
12
Minutes
Katrin Straub
Managing Director at nextsure
The desire to own a home is strong, but the savings account is empty. A mortgage without equity seems to many young families to be the only way into home ownership. This article shows how a so-called full financing arrangement can work, what requirements you need to meet and how to minimise the risks.
The topic in brief and concise terms
A property finance arrangement without equity (full financing) covers the purchase price and ancillary costs, but results in higher interest rates and stricter credit requirements.
Requirements are a high, stable income, an excellent SCHUFA credit report and often a second borrower.
Protection through term life and disability insurance is essential to protect your family from financial risks.
Understanding full financing: the 110% solution
A mortgage finance arrangement without equity means that the bank finances the entire purchase price as well as the ancillary costs. These ancillary costs can amount to up to 15 per cent of the purchase price, depending on the federal state. This is therefore often referred to as 110 per cent financing. For banks, this represents a higher risk, which is why they scrutinise applicants’ financial situation particularly carefully. An interest-rate surcharge of up to one percentage point compared with 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 any significant savings. The exact terms and conditions for such financing are crucial to the success of the project.
Check requirements: Who qualifies for the loan?
Banks only grant full financing under strict conditions in order to minimise their risk of default. Excellent creditworthiness, demonstrated by a SCHUFA score of over 97 per cent, is a basic requirement. Furthermore, above-average and stable household income is expected; civil servant status or a non-terminable position are ideal prerequisites here. Many institutions require two partners to sign the loan agreement in order to spread the risk across two incomes. Young applicants under 40 are preferred, as they still have a long working life ahead of them. A detailed household calculation is essential to demonstrate the long-term viability of the instalments. Fulfilling these criteria is the first step on the way to financing approval.
Calculating costs: More than just the purchase price
The total cost of buying a house goes far beyond the actual property price. The purchase-related additional costs are an essential factor that must be financed as part of full financing. These are made up of several items that vary depending on the region and purchase price. An accurate calculation is crucial for the mortgage loan without equity.
Here is a list of the typical additional costs:
Property transfer tax: Depending on the federal state, this amounts to between 3.5 and 6.5 per cent of the purchase price.
Notary and land registry fees: For notarising the purchase contract and registering it in the land registry, around 1.5 to 2 per cent is payable.
Estate agent's commission: If an estate agent is involved, buyer and seller share the commission, with the buyer's share often being around 3.57 per cent.
Possible surveyor's fees: A valuation report can cost between 500 and 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 additional costs must be taken into account when planning the financing amount in order to assess the financial burden realistically.
Protecting against risks: the foundation for the family's future
A financial commitment as significant as a mortgage without any equity requires comprehensive family protection. The loss of income through death or incapacity to work can put the entire financing at risk. Banks therefore often require certain insurance policies to be taken out as loan security. A term life insurance policy is often a condition for granting the loan.
Two insurance policies are of central importance here:
Term life insurance: It protects the family in the event of the main earner’s death. The sum insured should cover at least the amount of the loan, so that the surviving dependants can repay the mortgage and do not have to sell the house.
Income protection insurance: This steps in if a borrower can no longer work in their profession for health reasons. It pays a monthly benefit that helps continue servicing the mortgage repayments and maintain their standard of living.
Taking out a term life insurance policy is often comparatively inexpensive for young people. These forms of protection are not a trivial matter, but an essential building block for a secure future in your own home.
Use state aid: check grants for families
Young families can, under certain circumstances, take advantage of state support to reduce the financial burden. The Kreditanstalt für Wiederaufbau (KfW) offers special programmes. The programme “Wohneigentum für Familien” (300) provides low-interest loans to families whose income does not exceed certain limits and who build or buy in an environmentally friendly way. For a family with one child, the income limit is a taxable annual income of 90,000 euros. For each additional child, this limit increases by 10,000 euros. The maximum loan amounts can reach up to 270,000 euros, depending on the funding level and the number of children. These forms of support cannot replace equity, but they can noticeably reduce the monthly burden through lower interest rates. An early review of eligibility requirements is therefore an important step in financing planning.
Planning long term: keeping an eye on refinancing
A property finance package is a marathon, not a sprint, often lasting over 30 years. The initial fixed-interest period usually ends after ten or 15 years. By then, there is often still a significant outstanding balance, for which refinancing is required. The interest rate risk is the greatest danger here. If interest rates have risen by then, the monthly instalment for the remaining loan can be significantly higher. With full financing, the outstanding balance after the first phase is particularly high, which further increases the interest rate risk. It is therefore advisable to make early repayments during the initial term in order to reduce the outstanding balance as much as possible. Forward planning helps to structure the second financing phase securely too.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive specific suggestions for optimisation.
More useful links
The Deutsche Bundesbank provides a detailed report on the current development of the property market in Germany.
Wikipedia provides a comprehensive overview of the topic of mortgage finance.
The German Institute for Economic Research (DIW) provides research findings and analyses on the German property market.
FAQ
What requirements do I need to meet for a mortgage without a deposit?
You need excellent creditworthiness (high SCHUFA score), an above-average and secure income (e.g. as a civil servant or in permanent employment), ideally a second borrower, and should be under 40 years old.
What risks does full financing entail?
The main risks are higher interest rates, a longer loan term and higher monthly payments. In addition, there is a significant interest rate risk when refinancing, and in the event of a forced sale of the property, a remaining debt may remain.
Which insurance policies are important when financing without equity?
Term life insurance is essential and is often required by banks to secure the loan in the event of death. Income protection insurance protects you and your family against the financial consequences of a loss of income due to illness or an accident.
Are there government grants for young families?
Yes, the KfW programme “Home Ownership for Families” (300) offers low-interest loans for families who meet certain income thresholds and build or buy in a climate-friendly way. This can reduce financing costs.
What are the ancillary purchase costs and how high are they?
The additional purchase costs include land transfer tax (3.5% - 6.5%), notary and land registry fees (approx. 2%), as well as any estate agent fees (approx. 3.57%). In total, you should budget for around 10 to 15 per cent of the purchase price.
What happens after the fixed interest rate period ends?
At the end of the fixed-interest period (usually 10 or 15 years), there is still an outstanding balance for which you will need follow-on financing. If interest rates have risen by then, your new monthly instalment may be higher.
