How to Use a Building Savings Contract Correctly for Future Property Financing: A Practical Guide
03.07.2025
9
Minutes
Katrin Straub
Managing Director at nextsure
The dream of owning your own home often seems a long way off, especially when interest rates fluctuate. A building society savings contract can be the key, but only when used correctly does it reveal its full potential. This article shows you how to turn a simple savings product into a powerful tool for financing your home.
The topic in brief and concise terms
A building savings contract secures fixed loan interest rates for the future and thus protects you from interest rate increases.
State subsidies such as the homebuilding premium and employee savings allowance can increase your savings by up to €183 per year.
The accumulated savings are recognised by banks as full equity, which improves the terms for the main financing.
The three phases of building society savings: From saver to borrower
A building society savings contract goes through a cycle of three clearly defined phases. First comes the savings phase, in which you pay money in regularly until a minimum balance of usually 40 to 50 per cent of the contract sum is reached. If, for example, you have agreed a contract sum of 50,000 euros, you save up around 25,000 euros.
This is followed by the allocation phase, in which the building society makes the accumulated savings and the loan available to you. The final stage is the loan phase, in which you repay the credit at the interest rates fixed when the contract was concluded. These fixed interest rates are the biggest advantage in an environment of rising market interest rates.
Knowing these three phases is the basis for making full use of the further strategic options.
Government funding: Secure annual grants of up to €140
The state supports wealth building for home ownership with attractive bonuses. The housing construction premium (WoP) is one of the best-known subsidies for building society savers. Eligible single applicants receive ten per cent on their annual contributions of up to EUR 700, which corresponds to a premium of EUR 70.
For married couples, the amounts double to EUR 1,400 in contributions and EUR 140 in premiums. The income threshold for taxable income is EUR 35,000 for single applicants and EUR 70,000 for couples. Another form of support is the employee savings allowance, which is available on capital-forming benefits from the employer.
Here is an overview of the most important subsidies:
Housing construction premium: Up to EUR 70 (singles) or EUR 140 (couples) per year.
Employee savings allowance: Nine per cent on contributions up to EUR 470, i.e. up to EUR 43 per year.
Wohn-Riester: State bonuses and tax advantages for certified Riester building society savings contracts.
Capital-forming benefits (VL): Up to EUR 40 per month from the employer directly into the contract.
Our expert tip: Check your eligibility for subsidies every year, as income thresholds and personal circumstances can change. Applications are often possible retrospectively for up to two years. With these grants, you can significantly accelerate capital accumulation for your tailor-made home financing.
The home savings contract as an equity booster: How to convince the bank
Banks see equity as a decisive factor in lending and interest rates. A home savings contract strengthens your position, because the savings accumulated, including interest, are recognised as full equity. An equity ratio of 20 to 30 per cent is ideal for securing the best terms.
A home savings contract ready for allocation with a value of €50,000, of which €25,000 has been saved, increases your equity directly by those €25,000. This reduces the loan-to-value ratio of the financing, which in turn leads to a lower interest rate on the main loan. Even a reduction in the interest rate of 0.5 percentage points can amount to several thousand euros over the term.
Even a contract that is not yet ready for allocation can serve as collateral or be utilised via an advance loan for the favourable home financing. This makes the contract a flexible tool for overcoming hurdles in financing, especially with a property loan without much equity.
Strategic use: plan refinancing, purchase and modernisation cleverly
A building savings contract can be used in many ways if planned strategically. One of the most common uses is locking in interest rates for a future follow-on financing. If your initial fixed-rate period expires in ten years, you can secure today’s current loan interest rates with a building savings contract taken out now.
It is also ideal for planned modernisation projects. For loans of up to €50,000, an expensive land registry entry is often not required, saving several hundred euros in costs. This makes it perfect for energy-efficiency renovations or conversions in a few years’ time.
Here are three strategic ways to use it:
Follow-on financing: Secure a loan interest rate of, for example, two per cent today for the remaining debt in 10 or 15 years.
Ancillary purchase costs: Use the savings to cover the ancillary purchase costs (approx. 10-15 per cent of the purchase price), which banks are reluctant to finance.
Modernisation without land registry entry: Finance a new heating system for €25,000 flexibly and with minimal bureaucracy.
Our expert tip: Set the building savings sum realistically to suit your goal. An excessively high sum only leads to unnecessarily high arrangement fees of 1 to 1.6 per cent. The right planning turns the contract into a precise tool for your future financing strategy.
Expert knowledge: assessment number, allocation maturity and legal pitfalls
The path to payout goes via allocation maturity, which depends on three factors: minimum balance, minimum savings period and the decisive rating figure. The rating figure reflects your savings performance – the more you save, and the more regularly you save, the faster you reach the key figure required for allocation, which is often 44. You can find the exact calculation in the General Building Savings Conditions (ABB) of your contract.
Another important point is the costs. The opening fee is between 1 and 1.6 per cent of the home savings sum and is legally permissible. Annual service flat fees or account maintenance fees during the savings phase are not permissible, as the Federal Court of Justice ruled (case no. XI ZR 551/21). Check your old bank statements, because you can reclaim these fees for up to three years retroactively.
Also pay attention to the notice periods. While you can terminate the contract at any time in order to access your savings, the building society can terminate an allocation-mature contract if it is not used ten years after allocation maturity. This knowledge protects you from unexpected disadvantages and helps you make full use of the advantages of your home savings contract.
Your path to a tailored financing solution
A building society savings contract is not a self-running solution, but a tool that must be used correctly. The right strategy depends on your goals, your time horizon and your financial situation. Whether for securing interest rates, as proof of equity, or for flexible modernisation – careful planning is the key to success.
The complexity of the plans, funding conditions and legal framework requires careful analysis. Professional advice helps you choose the optimal target savings amount, apply for the appropriate subsidies and integrate the contract seamlessly into your overall financing strategy. This ensures that your path to home ownership is built on a solid foundation.
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More useful links
Wikipedia provides a comprehensive article explaining the basics and how a building savings contract works.
The Federal Statistical Office (Destatis) provides information on construction prices and the property price index in Germany.
You can find an overview of the construction industry in Germany at the Federal Statistical Office (Destatis).
The German Bundesbank publishes statistics on interest rates for residential building loans to private households.
The Federal Ministry of Finance explains the employee savings allowance.
The Consumer Advice Centre offers an article on whether a building savings contract is worthwhile.
You can obtain information on the recovery of unlawful building society fees from the Consumer Advice Centre.
Statista provides statistics on the development of construction interest rates in Germany.
Further statistics on interest rates for residential building loans to private households in Germany can be found at Statista.
A statement on the residential property credit directive is available on the Federal Ministry of Finance website.
FAQ
What are the biggest drawbacks of a building society savings contract?
The main disadvantages are the completion fees of 1 to 1.6 per cent of the home savings sum, which are due immediately, and the often low credit interest rates during the savings phase. In addition, the loans are usually associated with high repayment rates, which means a high monthly burden.
How quickly does a building savings contract become ready for allocation?
The time until allocation maturity depends on the amount of your savings contributions, the term of the contract and the valuation figure achieved. As a rule, it takes seven to ten years until the necessary 40 to 50 per cent of the building society savings target has been accumulated and the contract can be allocated.
Can I use a building savings contract for a renovation?
Yes, a building savings contract is ideal for modernisation and renovation measures. For loan amounts of up to €50,000, an entry in the land register is often not required, which simplifies the process and saves costs.
Are the fees negotiable in a building savings contract?
The arrangement fee is usually a fixed part of the contract. Negotiation is unusual. However, you can reclaim unlawful fees such as the annual service fee, based on a Federal Court of Justice ruling.
What is the difference between the housing construction bonus and the employee savings allowance?
The housing construction bonus is a direct government grant on your own contributions. The employee savings allowance is a subsidy for capital-forming benefits that your employer invests on your behalf. Both subsidies can be used for the same building savings contract, subject to certain income limits, but not for the same amounts paid in.
What does the rating score mean?
The assessment number is a key figure used by the building society to measure your savings performance (the duration and amount of your payments). It determines the order in which the home savings contracts are allocated. A higher assessment number leads to a quicker allocation.
