Equity is the amount you contribute to the property purchase from your own funds – everything that is not financed through a loan. How much you should bring not only determines whether the bank grants you a loan, but also the interest rate you receive. The rule of thumb is: at least the purchase-related ancillary costs, preferably 20 to 30 percent of the purchase price. We show you how much you really need, how equity affects your interest rate and which mistakes you should avoid.
What Counts as Equity?
Any assets that are immediately available to you without taking out a new loan count as equity. This includes more than many people think:
- Bank deposits: current account, instant-access and fixed-term deposits, savings accounts and savings certificates
- Securities: shares, funds and ETFs that you can sell
- Building society savings: the amount already saved under a building society contract
- An existing plot of land: an unencumbered building plot is treated as equity
- Sweat equity: the so-called muscle mortgage – work you carry out yourself and which the bank recognizes as fictitious equity
- Private loans and gifts: interest-free loans or gifts from relatives, provided they do not have to be repaid
Ongoing loans, an overdraft facility or assets that you should definitely retain as an emergency reserve do not count as equity. A safety cushion consists of three to six net monthly salaries, which you should not put into the financing.
How Much Equity Is Necessary? The Rules of Thumb
There is no single figure, but there are three clear benchmarks. The higher your equity, the more affordable and secure the financing:
- Absolute minimum – the purchase-related ancillary costs: Around 10 to 15 percent of the purchase price goes toward tax, notary fees and, where applicable, the estate agent’s commission. Banks are reluctant to finance these costs because they do not create any equivalent value. You should therefore be able to pay them out of your own pocket.
- Solid foundation – 20 percent of the purchase price plus ancillary costs: This noticeably reduces your loan amount, and you generally receive significantly better interest-rate terms.
- Comfortable – 30 percent and more: Anyone who contributes around one-third themselves pays the lowest interest rates, repays the loan faster and has the largest buffer if the property turns out to be worth less than expected.
Important: Buying without any equity is only in Possible in exceptional cases. We cover this special case – so-called 100% financing – in a separate guide. For most buyers, a solid equity cushion is the more sensible approach.
Purchase ancillary costs: Your hard minimum amount
Why are purchase ancillary costs the lower limit? Because they are incurred in addition to the purchase price and do not create lending value. In 2026, they consist of three items:
- Real estate transfer tax: The statutory rate is 3.5 percent (Section 11 GrEStG), but the federal states have set their own rates since 2006. In 2026, the range extends from 3.5 percent in Bavaria to 6.5 percent in Brandenburg, North Rhine-Westphalia, Saarland and Schleswig-Holstein.
- Notary and land register costs: They are governed uniformly nationwide by the Court and Notary Costs Act (GNotKG) and together amount to around 1.5 to 2 percent of the purchase price.
- Broker’s commission: It is only incurred if a broker is involved and is usually 5 to 7 percent including VAT. Since December 2020, buyers and sellers generally each bear half of it when purchasing an apartment or a single-family house (Section 656c BGB).
In total, you should expect around 9 to 12 percent of the purchase price, or more if a broker is involved. A calculation example for a purchase price of 400,000 euros in North Rhine-Westphalia:
- Real estate transfer tax (6.5 percent): 26,000 euros
- Notary and land register (around 2 percent): 8,000 euros
- Subtotal without broker: 34,000 euros
- Pro rata broker’s commission (example: 3.57 percent): around 14,300 euros
Without a broker, you therefore need at least around 34,000 euros in equity here; with a broker, closer to 48,000 euros – and that is before you apply the first euro to the purchase price.
Why more equity lowers your interest rate
The decisive lever is the loan-to-value ratio. It describes the relationship between your loan amount and the value of the property. The lower this figure, the lower the risk for the bank – and the more favorable your interest rate.
Banks work with thresholds. Up to a loan-to-value ratio of around 60 percent, you receive the best terms. At 80 percent, it becomes somewhat more expensive; from 90 percent and above, the interest-rate surcharge rises significantly. For comparison: At the beginning of July 2026, mortgage rates for ten-year fixed-rate periods are generally between 3.3 and 4.0 percent, for twenty years at around 3.7 to 4.3 percent. Within this range, your equity also determines whether you end up at the lower or upper end.
Here is how this affects a purchase price of 400,000 euros if you pay the additional costs separately from your equity:
- 10 percent equity (40,000 euros): Loan of 360,000 euros, loan-to-value ratio of around 90 percent – higher interest rate
- 20 percent equity (80,000 euros): Loan of 320,000 euros, loan-to-value ratio of around 80 percent – solid interest rate
- 30 percent equity (120,000 euros): Loan of 280,000 euros, loan-to-value ratio of around 70 percent – lower interest rate
An interest rate that is just 0.3 percentage points lower saves around 900 euros in interest per year on a loan of 300,000 euros – over the entire fixed-interest period, this adds up to a five-figure amount.
Advantages and disadvantages of a lot of equity
More equity is almost always beneficial – but putting everything into it is rarely wise. Weigh up the following:
- Advantage – lower interest rate: A lower loan-to-value ratio brings noticeably better terms.
- Advantage – smaller payment and shorter term: You borrow less, repay faster and are debt-free sooner.
- Advantage – greater security: If the property’s value falls, you are less likely to end up with insufficient coverage.
- Disadvantage – tied-up liquidity: Anyone who uses all their assets has no reserve for repairs, moving or unexpected expenses.
- Disadvantage – longer saving period: Anyone who saves too long for the perfect ratio may miss favorable buying opportunities or continue paying rent.
The key is balance: as much equity as makes sense, but always with an emergency fund in reserve.
FAQ about equity when buying property
How much equity do I need at minimum?
As an absolute minimum, you should be able to pay the purchase-related additional costs – real estate transfer tax, notary, land register and, where applicable, broker’s fees – from your own funds. Depending on the federal state and broker involvement, these amount to around 9 to 15 percent of the purchase price. An additional 20 percent of the purchase price is recommended.
Can I buy without any equity at all?
In principle, yes; this is known as 100-percent financing. However, it is more expensive because the bank bears a higher risk without equity and adds a corresponding premium to the interest rate. Banks also generally require a secure, high income in this case. For most buyers, a solid equity cushion is the more cost-effective and safer option.
Does personal labor count as equity?
Yes, within limits. Many banks recognize skilled work that you carry out yourself during construction or renovation as so-called sweat equity – usually up to around 10 to 15 percent of the construction costs. The prerequisite is that you can perform the work realistically and professionally.
How much does equity affect the interest rate?
Significantly. There can be several tenths of a percentage point between financing with a 90 percent loan-to-value ratio and financing with 60 percent. For larger loan amounts, this can quickly mean interest savings of several hundred to more than one thousand euros per year.
Should I use all my savings?
No. Always keep a reserve of around three to six net monthly salaries. Experience shows that additional costs arise after the purchase – moving, renovation, new furniture or unexpected repairs. Anyone without a buffer here may have to take out expensive additional financing.
Conclusion: Finding the right balance is key
How much equity you really need depends on your situation – but the guidelines are clear. The ancillary purchase costs are the absolute minimum; 20 to 30 percent of the purchase price is the solid basis for good interest rates. Every additional euro of equity reduces your loan-to-value ratio, your interest rate and your monthly payment. Nevertheless, you should not overdo it: An emergency fund covering several months’ salaries should always remain in your account, not in the property. Those who find this balance finance more affordably, sleep more soundly and retain financial flexibility even after the purchase.