Understanding the Initial Repayment Rate (Anfängliche Tilgung) in German Mortgages
•8 min read read
One‑sentence guide: what it is, why it matters, and how to pick the right number
1 | What exactly is it?
Initial repayment rate = the percentage of the loan you plan to repay as principal in the first year.
In your contract it might read: anfängliche Tilgung 2 % p.a.
- Usually used with a German annuity mortgage (Annuitätendarlehen) – your monthly payment is fixed.
- That payment covers interest + principal. As the balance falls, interest shrinks and principal grows.
- Because the percentage only applies to year 1 and then climbs automatically, we add the word "initial".
2 | Why does it matter?
| Impact | Explanation |
|---|---|
| Monthly payment | Higher initial rate → higher payment |
| Time to debt‑free | Higher rate → principal drops faster → shorter term |
| Total interest | Repay faster → smaller interest base → less interest paid |
⏩ As of July 2025, typical 10‑year fixed rates are ~3.1 %–3.9 % (Dr. Klein, Baufi24).
With only a 1 % initial rate you might pay for 40 years; advisers now recommend ≥ 2 % as a starting point.
3 | A quick number crunch
Loan €300 000, interest 3.3 %; different initial rates (rate held constant until payoff):
| Initial rate | Monthly payment (€) | Pay‑off time (years) |
|---|---|---|
| 2 % | 1 325 | 29.6 |
| 3 % | 1 575 | 22.6 |
| 4 % | 1 825 | 18.3 |
- Spending €250 extra per month (2 → 3 %) knocks off 7 years.
- Each extra percentage point typically saves 5–8 years.
4 | Why does it "grow automatically"?
- Payment is fixed: annuity = interest + principal
- Interest shrinks as the balance falls (interest = balance × rate ÷ 12)
- → Interest share ↓, principal share ↑, so the effective repayment rate rises month by month
The initial rate only sets your starting speed; it accelerates on its own from then on.
5 | How to choose the right initial rate?
- Start with cash‑flow
- Work out a "safe" payment (mortgage + fees ≤ 30–35 % of disposable income).
- Higher rates → higher repayment
- Counterbalance long‑term interest cost.
- Target term
- If you want to be debt‑free in 20 years, you'll likely need ≥ 3.5–4 %.
- Keep flexibility
- Most German loans allow special repayments (Sondertilgung); stash bonuses there instead of over‑stretching your monthly payment.
6 | TL;DR in one sentence
The initial repayment rate is your loan's "starting speed";
fixed payment, falling interest, rising principal – start higher, finish faster, and pay less interest overall.
Need a personalised amortisation schedule or scenario comparison? Share your loan size, fixed period and rate range – I'll crunch the monthly numbers for you!