Before the search for the dream property begins, one figure should be established: the maximum purchase price. It is not based on wishful thinking, but on a sober calculation – household income, the affordable monthly instalment and available equity. We show you step by step how to determine your budget realistically, and why this calculation also helps sellers set the right price.
What does “being able to afford a property” mean?
“Being able to afford” does not mean that a bank approves your loan – it means that you can reliably manage the monthly instalment over 20 or 30 years without having to forgo reserves. The crucial error many prospective buyers make is starting with the purchase price of a specific property and asking whether it will “somehow work”. The correct order is the reverse – from the budget to the property.
In the end, there is your maximum purchase price, and it depends on three key factors:
- The affordable monthly instalment: How much remains each month without things becoming tight?
- The loan: What loan amount can this instalment support at current interest rates?
- The equity: How much are you contributing yourself – for ancillary costs and to reduce the loan?
The purchase price can be derived precisely from these three figures. The only important thing is that you calculate in the right order.
Five steps to the maximum purchase price
Step 1: Prepare a household budget
Compare all regular net household income with all ongoing expenses – honestly and completely. Income includes salaries, child benefit and stable additional income. Expenses include everything except your current rent: food, insurance, mobility, childcare, leisure activities, ongoing loans and savings instalments. What remains is your scope for financing.
Step 2: Set the affordable monthly instalment
As a rule of thumb, the instalment for interest and repayment should not exceed approximately 35 percent of net household income, or 40 percent at most in exceptional cases. With net income of 4,500 euros, that is around 1,575 euros. Calculate more conservatively if plans to have children, parental leave or uncertain income are involved. Also remember: As an owner, you will pay maintenance, property tax and – for apartments – the service charge in future. These items do not belong in the loan instalment.
Step 3: Calculate the loan from the instalment
The The monthly payment consists of interest and principal repayment. You can calculate the maximum loan amount using this formula:
Loan = (monthly payment × 12) ÷ (nominal interest rate + initial repayment) × 100
With a payment of 1,500 euros, a nominal interest rate of 3.8 percent and an initial repayment of 2 percent, the result is: (1,500 × 12) ÷ 5.8 × 100, or approximately 310,000 euros in loans. If the interest rate rises, the possible loan decreases for the same payment—which is why the current interest rate is so decisive.
Step 4: Include equity
Add your freely available equity to the loan—savings, securities, building-society savings, and, where applicable, a family loan. Always keep a reserve of several months’ expenses; it should not be invested in the property. With 80,000 euros in equity and a 310,000-euro loan, you therefore have a 390,000-euro total budget available.
Step 5: Deduct purchase-related costs
The final, often underestimated step: Not the full 390,000 euros goes toward the purchase price, because the purchase-related costs must also be paid—usually from equity. Depending on the federal state and the broker’s involvement, they amount to around 10 to 15 percent of the purchase price. Only after deducting them is the maximum purchase price determined.
Example calculation: from income to purchase price
Let’s bring the figures together. A couple with a net household income of 4,500 euros and 80,000 euros in equity is planning a purchase:
- Affordable payment: approximately 1,500 euros per month (about one-third of net income)
- Maximum loan: approximately 310,000 euros (at 3.8% interest and 2% repayment)
- Total budget: 310,000 euros loan + 80,000 euros equity = 390,000 euros
- Purchase-related costs: assumed to be 11 percent of the purchase price
- Maximum purchase price: 390,000 ÷ 1.11 = approximately 351,000 euros
The remaining nearly 39,000 euros go toward real estate transfer tax, the notary, the land register and the broker. The example shows: A solid income and decent equity result in a property in the region of 350,000 euros—not more, even if the bank might approve a larger loan.
Why purchase-related costs carry such weight
The additional costs are not a rounding error, but a major expense that many buyers plan for too late. They consist of:
- Real estate transfer tax: The statutory basic rate is 3.5 percent (Section 11 GrEStG); the federal states may deviate. 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: usually around 1.5 to 2.0 percent in total. The fees are regulated uniformly throughout Germany in the GNotKG and are based on the purchase price.
- Broker's commission: if a broker is involved, frequently around 3.57 percent including VAT as the buyer's share.
Depending on the federal state and broker involvement, the total ranges between approximately 5.5 and 14 percent of the purchase price. Anyone buying without commission shifts this threshold noticeably upward.
Full budget or safety buffer? Advantages and disadvantages
Should you fully exhaust your calculated maximum? Both approaches have their justification:
- Advantage of fully exhausting it: In sought-after locations, you get more square metres, rooms or a better address – an advantage that can pay off in the long term.
- Advantage of a buffer: A lower instalment provides protection if interest rates are adjusted after the fixed-interest period expires, in the event of job loss or unexpected repairs. You sleep more peacefully.
- Disadvantage of fully exhausting it: Without a reserve, every extra repayment, every new heating system and every dip in income becomes a problem.
- Disadvantage of a budget that is too small: Those who plan too cautiously may not find a suitable property at all in expensive regions and wait in vain.
A tried-and-tested middle ground: Calculate using the 35-percent rule, not 40 percent, and set a higher initial repayment rate as soon as your income allows.
What the budget calculation means for sellers
The buyer's perspective is also worth real money to sellers. Anyone who knows how prospective buyers form their budget can set the asking price more realistically: A price just above a “round” budget threshold excludes many potential buyers whose financing ends exactly there. The calculation also helps assess the seriousness of prospective buyers. Before agreeing, ask for financing confirmation from the bank – this way you can identify who can really buy and avoid a cancelled notary appointment. On TraumImmo, you reach precisely those buyers whose budget matches your property with a market-based price.
FAQ on calculating a budget when buying property
What percentage of my income should the loan instalment be at most?
As a rule of thumb, the instalment for interest and repayment should not exceed around 35 percent of the household's net income, in exceptional cases, at most 40 percent. Important: Additional costs such as property tax, maintenance and service charges are added to the installment and should be taken into account in the calculation.
How much equity do I need at a minimum?
As a lower limit, you should be able to pay all ancillary purchase costs out of your own pocket. In addition, an equity share of around 20 percent of the purchase price is recommended. The more equity you contribute, the lower the interest rate and installment.
Can I also buy without equity?
So-called 100% financing is possible, but more expensive and riskier. Banks charge higher interest rates, the installment increases, and a short-notice sale could result in insufficient proceeds to cover the loan. Without equity for the ancillary costs, financing is generally difficult.
What role does the current mortgage interest rate play in my budget?
A major one. In 2026, interest rates for ten-year financing are generally between around 3.5 and 4.5 percent. Even one percentage point more significantly reduces the possible loan amount at the same installment—so always check using the current daily interest rate.
How much credit will the bank approve for me?
The bank often approves more than feels comfortable in the long term because it primarily checks your current creditworthiness. Do not rely solely on the approval, but on your own honest household budget calculation. You live with the installment, not the bank.
Conclusion: The budget first, then the property
Anyone who knows what they can afford searches more purposefully, negotiates more confidently and avoids disappointments. The calculation is simpler than it sounds: determine an affordable installment, derive the loan from it, add equity and subtract the ancillary purchase costs. The result is a realistic purchase price—the best basis for the search. And conversely, for sellers: A price that fits the target group's budget sells fastest.