Building savings contract (Bausparvertrag) in Germany

How the contract works in law

Section 1 of the BauSparkG defines the business. A Bausparkasse is a credit institution that takes deposits from savers (Bauspareinlagen) and, out of the amounts collected, grants them loans for housing purposes. A saver is a person who signs a contract under which, after paying the deposits, he acquires a legal claim to a building-society loan. Every saver belongs to a Kollektiv, the community of savers of the institution.

Four terms in the Act are worth knowing:

• Zuteilung (allocation) is the release of your savings balance and your loan from the pool available, once the contractual conditions are reached.
• Zuteilungsmasse is the pool of funds the allocation is paid from.
• Wartezeit (waiting period) is the time from the start of the contract to allocation.
• Bauspardarlehen (building-society loan) is the loan paid on allocation.

So the product has two phases: a savings phase, then a loan phase. The rates are set in the contract, not in this guide: section 5 requires the general terms to state the interest on deposits and on loans, the fees charged to savers, the conditions and order of allocation, how a contract can be terminated, assigned or increased, and the security for the loan. The numbers are in your contract.

What counts as housing purposes

Section 1(3) BauSparkG lists the “housing-economic measures”: building, buying, maintaining and improving residential buildings and flats; buying the right to permanent use of living space; buying a plot or ground lease to build housing; developing residential areas; and paying off debts that were taken up for those measures or that rest on a plot used mainly for housing. A loan from a Bausparkasse can therefore also refinance debt on a home you already own.

Supervision

A Bausparkasse needs a licence from the supervisor (section 2 BauSparkG), must be a stock company if it is private, and must hold core capital of at least €20 million among other conditions. The financial supervisor (BaFin) supervises under the Act and the banking act (section 3). Its general terms must be consistent with a “balanced relationship” between what savers pay and what the institution pays, and must not unreasonably delay allocation (section 5(4)).

The state premium

The Wohnungsbau-Prämiengesetz (WoPG) pays a premium on building-society contributions. As a calculation from the statute:

Conditions in the Act:

• You must be fully liable to German income tax (section 1 WoPG, referring to section 1(1), (2) or (3) of the income-tax act) and be 16 or over, or a full orphan. Under section 1(1) EStG this means a home or habitual residence in Germany. If you live abroad, you generally fall outside it, with exceptions the tax act lists.
• Contributions to the same Bausparkasse must total at least €50 in the saving year (section 2(1) no. 1 WoPG), and the Bausparkasse must be established and licensed in the EU.
• Contributions that are vermögenswirksame Leistungen (employer-paid capital-formation benefits) with a right to the employee savings bonus do not also earn the premium (section 1 no. 1).
• The income limit uses the taxable income of the saving year, and for spouses the joint assessment figure.
• The premium claim arises at the end of the saving year; you apply by the end of the second calendar year after the saving year, to the institution that received the contributions (section 4).

Using the money

To keep the premium, you must use the paid-out sum, or what you receive by borrowing against the claims, promptly and directly for housing (section 2(2) WoPG). There is an exception: a payout without housing use does not forfeit the premium if it happens at least seven years after signing and the saver was under 25 at signing. In that case the premium is limited to the last seven saving years, and a person can use the exception only once. Death or full disability of the saver or the spouse, or at least a year of continuous unemployment, are also harmless. The housing use must be in an EU or EEA state unless otherwise provided.

Is it right for a foreign buyer?

The Act gives no condition tied to nationality. The premium, however, depends on being fully liable to German income tax. A newly arrived expatriate who establishes a home or habitual residence in Germany meets that condition from that point. For loan alternatives see the guide on how a German home loan works and the guide on KfW loans.

Which professional to consult

A mortgage broker can compare building-society offers with a bank loan (see the mortgage-broker page). A tax adviser checks the premium conditions against your income; Payotte does not list tax advisers. Use the mortgage calculator for the bank-loan side.