When comparing German mortgage offers, you will encounter two interest rate figures: the Sollzins (nominal interest rate) and the Effektivzins (effective annual rate). Understanding the difference between these two rates is essential for comparing offers accurately and avoiding costly mistakes. Many borrowers — including experienced ones — have lost thousands of euros by focusing on the wrong number.
This comprehensive guide explains exactly what each rate includes, how they are calculated, which one to use for comparisons, and the important costs that are not included in either rate. By the end, you will be able to read any German mortgage offer with confidence.
The Sollzins — also called the gebundener Sollzinssatz for fixed-rate mortgages or the veränderlicher Sollzinssatz for variable-rate mortgages — is the base interest rate used to calculate your monthly payments. It reflects the pure cost of borrowing money, without additional fees, processing costs, or compounding effects.
When a bank advertises 'mortgage rates from 3.29%,' they are typically quoting the Sollzins. It is the headline figure because it is always lower than the Effektivzins, making the offer appear more attractive.
Your monthly mortgage payment (Annuität) is calculated using the Sollzins and your chosen initial repayment rate (anfängliche Tilgung). The formula is: Annual payment = Loan amount × (Sollzins + Tilgung rate). This annual amount is divided by 12 for your monthly payment.
Example: On a €300,000 loan with a 3.5% Sollzins and 2% initial Tilgung, your annual payment is €300,000 × 5.5% = €16,500, which means a monthly payment of €1,375. The Sollzins determines how this payment is split between interest and principal repayment each month.
The Effektivzins — formally called the effektiver Jahreszins — is a standardized rate that includes the Sollzins plus all mandatory costs associated with the mortgage, expressed as an annualized percentage. German law (specifically §6 of the Preisangabenverordnung, PAngV) requires all lenders to calculate and disclose the Effektivzins in a standardized way, making it the only truly comparable figure across different mortgage offers.
Several important costs are explicitly excluded from the Effektivzins calculation. This is a common source of confusion and can lead to significant underestimation of total mortgage costs:
The exclusion of Bereitstellungszinsen is particularly important for buyers of new-build properties (Neubau). If your construction takes 12-18 months and the bank charges Bereitstellungszinsen after a 3-6 month free period, the actual cost of your mortgage could be thousands of euros higher than implied by the Effektivzins.
The gap between Sollzins and Effektivzins typically ranges from 0.05% to 0.20%, depending on the lender's fee structure. While this may seem small, on a large mortgage it adds up significantly.
Consider two mortgage offers for a €350,000 loan with a 10-year Zinsbindung:
At first glance, Bank B appears cheaper because its Sollzins (3.29%) is lower. But Bank B's Effektivzins (3.48%) is actually higher than Bank A's (3.42%) due to the additional fees. Over the 10-year fixed period, choosing Bank B would cost approximately €2,100 more in total, despite its lower headline rate.
This example illustrates exactly why the Effektivzins is the only reliable comparison metric. Banks with lower Sollzins sometimes compensate through higher fees, and only the Effektivzins captures this complete picture.
German law requires mortgage offers to contain specific information in a standardized format (Europäisches Standardisiertes Merkblatt or ESIS). Here is what to look for and where to find the key rate information:
Understanding what constitutes a 'good' Effektivzins requires context — it depends on the current market environment, your personal financial profile, and the specific loan parameters.
Expats should pay particular attention to the Effektivzins rather than advertised Sollzins rates, which may not be available to international borrowers. Some banks charge slightly higher processing fees for international applications due to additional verification requirements. An experienced broker can identify lenders that offer the most competitive Effektivzins for expat profiles.
If you are buying a new-build property (Neubau), the Effektivzins alone may significantly understate your total cost due to Bereitstellungszinsen. Calculate the total cost including commitment fees based on your expected construction timeline. Banks with longer bereitstellungszinsfreie Zeiten may offer a higher Effektivzins but lower total cost for new-build purchases.
When comparing refinancing offers (Anschlussfinanzierung), the Effektivzins comparison is even more important because fees can vary significantly. Some banks charge higher processing fees for refinancing applications. Also compare any costs of transferring the Grundschuld from your current bank, which are not included in the Effektivzins.
For those interested in the technical details, the Effektivzins is calculated using the internal rate of return (IRR) method, also known as the 'equation of equal present values' or the 'Äquivalenzgleichung.' This method finds the discount rate that makes the present value of all payments equal to the present value of the loan disbursement.
The calculation considers the exact timing and amount of every payment (disbursement, monthly payments, fees) and finds the annualized rate that equates the cash flows. This is why two loans with the same Sollzins but different fee schedules produce different Effektivzins values.
Always use the Effektivzins (effective annual rate) to compare mortgage offers. The Effektivzins includes all mandatory costs and accurately reflects the true cost of borrowing. Two offers with the same Sollzins can have significantly different Effektivzins due to different fee structures.
The Effektivzins includes costs beyond the nominal interest rate — such as account fees, processing fees, and the effect of monthly (rather than annual) compounding. These additional costs always make the Effektivzins higher than the Sollzins, typically by 0.05-0.20%.
No, Bereitstellungszinsen (commitment fees on undisbursed loan portions) are NOT included in the Effektivzins calculation. This is an important caveat — for new-build purchases where loan disbursement happens in stages, the actual cost of your mortgage can be significantly higher than the quoted Effektivzins due to Bereitstellungszinsen.
As of early 2025, a competitive Effektivzins for a 10-year Zinsbindung with 80% LTV ranges from 3.1% to 3.9%. Below 3.2% is excellent (typically requiring 60% or lower LTV and strong credit). Above 4.0% suggests room for improvement through better equity, SCHUFA optimization, or using a broker to access more competitive lenders.