How to Properly Use a Building Society Contract for Future Construction Financing: A Practical Guide
3 Jul 2025
7
Minutes
Katrin Straub
CEO at nextsure
The dream of owning a home often seems far away, especially with fluctuating interest rates. A home savings contract can be the key, but it only reaches its full potential when used correctly. This article will show you how to turn a simple savings product into a powerful tool for your home financing.
The topic in brief and concise terms
A home savings contract ensures fixed loan interest rates for the future, thus protecting against interest rate increases.
State subsidies such as the housing construction premium and employee savings allowance can increase your savings by up to 183 euros per year.
The accumulated savings are recognised by banks as full-fledged equity, which improves the conditions for the main financing.
The three phases of building savings: From saver to borrower
A building savings contract goes through a cycle of three clearly defined phases. First comes the savings phase, during which you regularly deposit money until you reach a minimum balance of typically 40 to 50 percent of the agreed building savings sum. For example, if you have agreed on a building savings sum of 50,000 euros, you save around 25,000 euros.
Next is the allocation phase, in which the building society provides you with the accumulated savings and the loan. The final stage is the loan phase, where you repay the loan at the interest rate set when the contract was signed. These fixed interest rates are the greatest advantage in an environment of rising market interest rates.
Understanding these three phases is the foundation to fully exploit further strategic opportunities.
State subsidies: Secure annual grants of up to 140 euros
The government supports wealth building for home ownership with attractive allowances. The housing subsidy (WoP) is one of the most well-known incentives for home savers. Eligible singles receive ten percent on their annual contributions of up to 700 euros, which corresponds to a subsidy of 70 euros.
For married couples, the amounts double to a 1,400 euro contribution and a 140 euro subsidy. The income limit for taxable income is 35,000 euros for singles and 70,000 euros for couples. Another support is the employee savings allowance, which applies to asset-effective benefits from the employer.
Here is an overview of the most important subsidies:
Housing subsidy: Up to 70 euros (singles) or 140 euros (couples) per year.
Employee savings allowance: Nine percent on contributions up to 470 euros, so up to 43 euros annually.
Home-Riester: State allowances and tax advantages for certified Riester savings contracts.
Asset-effective benefits (VL): Up to 40 euros monthly from the employer directly into the contract.
Our expert tip: Check your eligibility for subsidies annually, as income limits and life circumstances may change. Applications can often be made up to two years retroactively. With these grants, you significantly accelerate the capital accumulation for your tailored construction financing.
The home savings contract as an equity booster: How to convince the bank
Banks consider equity a crucial factor for lending and interest rates. A building savings contract strengthens your position, as the saved balance including interest is recognized as full equity. An equity ratio of 20 to 30 percent is ideal for obtaining the best conditions.
A building savings contract ready for allocation of 50,000 euros, with 25,000 euros saved, directly increases your equity by these 25,000 euros. This reduces the loan-to-value ratio of the financing, which in turn leads to a lower interest rate for the main loan. Even a reduction of the interest rate by 0.5 percentage points can mean several thousand euros saved over the term.
Even a contract not yet ready for allocation can serve as security or be utilized through an advance loan for affordable home financing. This makes the contract a flexible tool to overcome hurdles in financing, especially with a property loan with little equity.
Strategic Approach: Smart Planning for Follow-up Financing, Purchase, and Modernisation
A building savings contract can be highly versatile when planned strategically. One of the most common applications is securing interest rates for a future follow-up financing. If your initial interest rate lock expires in ten years, you can secure the current loan interest rates today with a building savings contract.
It's also ideal for planned modernisations. For loans up to 50,000 euros, no expensive land register entry is usually necessary, saving costs of several hundred euros. This makes it perfect for energy-efficient renovations or conversions in a few years.
Here are three strategic applications:
Follow-up financing: Secure a loan interest rate of, for example, two percent for the remaining debt in 10 or 15 years from today.
Additional purchase costs: Use the credit to cover additional purchase costs (around 10-15 percent of the purchase price), which banks are reluctant to finance.
Modernisation without land register entry: Finance a new heating system for 25,000 euros flexibly and with minimal bureaucratic effort.
Our expert tip: Adjust the building savings sum realistically to your goal. A sum that is too high will only lead to unnecessarily high initial fees of one to 1.6 percent. Proper planning makes the contract a precise instrument for your future financing strategy.
Expert Knowledge: Evaluation Score, Allocation Readiness and Legal Pitfalls
The path to payout leads through allocation readiness, which depends on three factors: minimum balance, minimum saving period, and the crucial assessment number. The assessment number reflects your savings performance – the higher and more regularly you save, the quicker you reach the necessary metric for allocation, often around 44. The precise calculation can be found in the General Building Savings Conditions (ABB) of your contract.
Another important point is the costs. The arrangement fee is between one and 1.6 percent of the total saving amount and is legally permissible. However, annual service fees or account maintenance fees during the saving phase are not permissible, as ruled by the Federal Court of Justice (Case No. XI ZR 551/21). Check your old account statements, as you can reclaim these fees for up to three years.
Also, pay attention to notice periods. While you can cancel the contract at any time to access your savings, the building society can terminate an allocation-ready contract if it is not utilised ten years after allocation readiness. This knowledge protects you from unexpected disadvantages and helps you fully exploit the benefits of your building savings contract.
Your path to a tailored financing solution
A building savings contract is not a sure thing, but a tool that must be used correctly. The right strategy depends on your goals, your time horizon, and your financial situation. Whether for interest rate security, as proof of equity, or for flexible modernisation – careful planning is the key to success.
The complexity of tariffs, funding conditions, and legal frameworks requires careful analysis. Professional advice helps you select the optimal building savings sum, 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.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive article explaining the basics and functioning of a building savings contract.
The Federal Statistical Office (Destatis) provides information on construction prices and the property price index in Germany.
An overview of the construction industry in Germany can be found at the Federal Statistical Office (Destatis).
The Deutsche Bundesbank publishes statistics on interest rates for housing 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.
Information on reclaiming inadmissible fees from building societies can be obtained from the Consumer Advice Centre.
Statista provides statistics on the development of construction interest rates in Germany.
Further statistics on interest rates for housing 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 disadvantages of a building savings contract?
The main drawbacks are the closing fees ranging from one to 1.6 percent of the savings amount, which become due immediately, and the often low interest rates on savings during the accumulation phase. In addition, the loans usually come with high repayment rates, which means a significant monthly burden.
How quickly does a building savings contract become ready for allocation?
The time until maturity depends on the amount of your savings rate, the duration of the contract, and the achieved evaluation number. Typically, it takes seven to ten years to save the necessary 40 to 50 percent of the building savings sum and have the contract 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 up to 50,000 euros, an entry in the land register is often not required, which simplifies the process and saves costs.
Are the fees in a home savings contract negotiable?
The final fee is usually a fixed component of the contract. Negotiating it is uncommon. However, you can reclaim inadmissible fees like the annual service charge, based on a Federal Court of Justice ruling.
What is the difference between the Wohnungsbauprämie and the Arbeitnehmersparzulage?
The housing construction premium is a direct government subsidy on your own contributions. The employee savings allowance is a subsidy on capital-building payments that your employer invests for you. Both subsidies can be used for the same building savings contract under certain income limits, but not for the same deposited amounts.
What does the rating number mean?
The rating number is a metric of the building society that measures your savings performance (duration and amount of deposits). It determines the order in which the building society contracts are allocated. A higher rating number leads to a faster allocation.
