Sollzins vs Effektivzins: Understanding German Mortgage Rates

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.

What Is the Sollzins (Nominal Interest Rate)?

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.

How the Sollzins Determines Your Monthly Payment

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.

What Is the Effektivzins (Effective Annual Rate)?

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.

What's Included in the Effektivzins

The Sollzins (nominal interest rate) itself
Account management fees (Kontoführungsgebühren), if charged
Processing fees (Bearbeitungsgebühren), if applicable
The compounding effect of monthly payments (interest-on-interest effect)
Costs that are mandatory for obtaining the mortgage, such as required insurance premiums in some cases
The timing of disbursements and payments (a loan disbursed in installments has a different Effektivzins than one disbursed in full)

What's NOT Included in the Effektivzins

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:

Bereitstellungszinsen: Commitment fees on undisbursed loan portions (0.25%/month or 3%/year) — extremely relevant for new builds
Property valuation costs (Schätzkosten): Typically €300-€800, sometimes waived by the bank
Grundschuld registration costs: Notary and land registry fees for registering the mortgage lien
Insurance premiums: Gebäudeversicherung (building insurance) and Risikolebensversicherung (term life insurance), which some banks require
Sondertilgung: Any extra repayments you make, and their effect on total interest paid
Costs of refinancing (Anschlussfinanzierung) at the end of the fixed period

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.

Why the Difference Between Sollzins and Effektivzins Matters

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.

Real-World Comparison Example

Consider two mortgage offers for a €350,000 loan with a 10-year Zinsbindung:

Bank A: Sollzins 3.35%, Effektivzins 3.42%, no account fees, no processing fee
Bank B: Sollzins 3.29%, Effektivzins 3.48%, €250/year account fee, €500 processing fee

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.

How to Read a German Mortgage Offer (Darlehensangebot)

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:

Look for the 'Effektiver Jahreszins' — this is your primary comparison figure
Note the 'Gebundener Sollzinssatz' and confirm the Zinsbindung period it applies to
Check 'Sonstige Kosten' (other costs) for any fees included in the Effektivzins calculation
Look for 'Bereitstellungszinsen' and the 'bereitstellungszinsfreie Zeit' (free commitment period)
Review the 'Sondertilgungsrecht' section to understand your extra repayment options
Check for 'Tilgungswechsel' provisions — can you adjust your repayment rate during the term?
Note the total amount payable (Gesamtbetrag) over the fixed period — this is the sum of all payments

The Effektivzins in Context: What's a Good Rate?

Understanding what constitutes a 'good' Effektivzins requires context — it depends on the current market environment, your personal financial profile, and the specific loan parameters.

Benchmarking Your Rate (Early 2025)

Excellent (below 3.2%): Achievable with 60%+ equity, top SCHUFA score, stable employment, and a 10-year Zinsbindung
Good (3.2% - 3.5%): Standard competitive rate for borrowers with 20-40% equity and good profiles
Average (3.5% - 3.8%): Typical for borrowers with 10-20% equity or minor profile weaknesses
Above average (3.8% - 4.2%): Indicates room for improvement — consider more equity, SCHUFA cleanup, or different banks
High (above 4.2%): Suggests significant profile issues (low equity, self-employed, limited residency) — get a broker's help

Special Considerations for Different Borrower Types

Expats and International Buyers

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.

New-Build Buyers

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.

Refinancing Borrowers

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.

Advanced: How the Effektivzins Is Calculated

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.

Key Takeaways for Comparing German Mortgage Offers

Always compare offers using the Effektivzins — never the Sollzins
The Effektivzins is legally standardized, making it a reliable comparison metric
Be aware that Bereitstellungszinsen are NOT included in the Effektivzins — critical for new builds
A lower Sollzins does not always mean a cheaper mortgage overall
Request at least 3 offers and compare them side by side using Effektivzins
Look beyond the rate to Sondertilgung rights, Tilgungswechsel options, and flexibility
An independent broker can present all offers in a standardized comparison format
The total amount payable (Gesamtbetrag) over the fixed period is the ultimate bottom-line figure

Frequently Asked Questions

Which rate should I use to compare German mortgage offers?

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.

Why is the Effektivzins always higher than the Sollzins?

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%.

Are Bereitstellungszinsen included in the Effektivzins?

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.

What is a good Effektivzins for a German mortgage in 2025?

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.