Monthly Archives: May 2019

Mortgage Loans: What is a Mortgage Loan

A mortgage loan is a specially secured variant of a loan and finds particular use in the allocation of high loan amounts. The lending banks achieve a high degree of stability by providing a deposit, the mortgage. In return, borrowers benefit from relatively cheap long-term loans. In particular, the repayment obligations are generally attractive in relation to the sum.

What is a mortgage loan?

What is a mortgage loan?

The contractual basis for granting a mortgage loan is the existence of a property that is included in the process of lending for the purpose of collateralization. Here, a so-called land charge is entered for a house or apartment. Responsible for this is exclusively the responsible land registry. Basically, such real estate matters are subject to strict state supervision . Also, the acquisition of a property or a property with the intention to specify it later as a mortgage, must be certified by a notary. An alternative approach categorically excludes the legislator. The version of the mortgage loan is extremely popular. In Germany, the vast majority of all loan agreements concluded in the field of real estate acquisition or real estate financing come about in this form.

Lender and approach


In addition to traditional banks, building societies and life insurance companies act as lenders . Regardless, the nature or extent of the property. In addition, a mortgage loan for legal and natural persons is possible. The main reason for including a property in the loan conditions is the relatively straightforward variant of the hedge: In the event of a default of payment, the lender has a legally regulated right to exploit the property. This is sold by the bank and the proceeds are used to settle the existing obligations of the insolvent debtor.

Legal basis

The background for such a procedure is the legal situation, which, in addition to a certain grace period for the borrower in financial distress, declares further comprehensive points binding. These include primarily the incurred and clearly regulated costs. Mortgage loans are subject to notarial certification . The competent notary collects in the course of his certification activity according to the scale of fees set rates . The property serving as collateral must be entered in the land register . In this respect, costs are incurred as well as for the determination of the land charge, ie the properly determined property value or value of the property. In addition to these special fees, the usual costs for general notarial matters arise, such as appointments and advice. With the notarial certification as information, the bank then calculates the amount of the annual percentage rate of interest excluding the account maintenance fee and the one-off closing fee. The level of interest represents a long-term burden for the borrower and should therefore be the focus of the contractual negotiation with the lender. A distinction is made here between a loan with flexible and fixed interest rates .

What requirements exist for the mortgaged property?

In connection with the granting of mortgage loans, certain requirements are regularly imposed on the mortgaged property arising from banking supervisory regulations . This is to ensure that the property in question remains a valuable asset throughout the loan term. Thus, it must be possible to realize the mortgaged property in a timely manner and there must be adequate indemnity insurance. Furthermore, the value of the property to be leased is estimated by an independent expert. To ensure that the security continues to be valuable, there is also regular monitoring by the financing bank . This monitoring has to be done annually for commercial real estate, while for residential real estate, surveillance is considered sufficient every three years.

What are the advantages and disadvantages of the mortgage loan?

One of the advantages of having a mortgage loan is the comparatively low interest rate . Since the loan is collateralized with a real estate, the risk of a loan default for the financing bank is usually much lower than for many other types of loans, for example consumer loans. Therefore, the terms of a mortgage loan are usually much cheaper than unsecured loans. Another advantage is that the borrower can deduct the interest on a mortgage loan for tax purposes, provided that he does not live in the property in question, but leases it to third parties. In this case, the loan interest may be deducted for tax purposes as income-related expenses in connection with rental and lease income . In addition, rental income from a rented apartment ideally should be sufficient to cover the monthly payment obligations for interest and principal.

One disadvantage of mortgage loans is the notary and court costs associated with the registration of land charges. In addition, the borrower bears the rental loss risk in the event of letting to third parties. This results from the fact that the borrower must continue to pay the interest and repayments for his mortgage loan to the bank even if he does not find a tenant for his property or if the tenant is insolvent. In this case, the borrower no longer has ongoing rental income available for the debt service, so he has to finance interest and principal from his other current income. Other disadvantages for many borrowers are the comparatively long maturity as well as the typically high loan volume of mortgage loans and the associated psychological burden. Furthermore, premature termination of mortgage loans usually entails higher transfer fees due to the higher loan amount, which further limits the financial flexibility of the borrower .

Which mortgage loan models are there?

Which mortgage loan models are there?

If you are interested in a mortgage loan, you can choose from a variety of different offers, not only by the specific conditions, but also by features such as maturity, interest and. differentiate. The most common type of mortgage loan in Germany are so-called fixed mortgages . The designation is based on the fact that a fixed interest rate is agreed over the entire term of these financings. This applies regardless of the respective market developments and is therefore not adjusted downwards or upwards even with interest rate cuts or interest rate increases . The advantage of a fixed-rate mortgage is first and foremost the fact that the financing costs incurred are known in detail from the beginning and over the entire term of the loan. Moreover, the borrower does not have to expect a rise in the price of his credit when interest rates rise. Conversely, he can not benefit from cost savings when interest rates are falling. The higher level of security and predictability of a fixed-rate mortgage can usually be compensated by the bank through a certain premium. The longer the term of a fixed-rate mortgage, the more expensive it is for the borrower .

In addition, a prepayment penalty will be payable to the bank if the borrower wishes to redeem the fixed-rate mortgage early. The terms of a fixed rate mortgage loan can vary from two years to around 25 years, with contracts with maturities of five to ten years being most frequently completed .

In addition to fixed-rate mortgages , there are also so-called variable mortgages , that is, mortgage loans with a variable interest rate. The interest rate can be adjusted by the bank at any time in line with market developments . This is attractive for the borrower, who assumes that interest rates will fall in the coming years. At the same time, this entails the risk of having to spend considerably more on the repayment of the loan when interest rates are rising than initially calculated. In the case of variable mortgages, termination is usually possible at any time subject to a period of notice of six months .


Other forms of mortgage loans

Other forms of mortgage loans

Until a few years ago, mortgage loans with variable interest rates were still relatively rare in Germany, but in other countries – such as in the USA – they are the norm. In the meantime, however, more and more variable mortgages are being concluded in Germany as well. Another form of mortgage loan is the LBOR mortgage . It is characterized by the fact that the interest rate is based on the development of LBOR. The abbreviation LBOR stands for “London Bank Offered Rate” . This is a reference interest rate used in interbank business, which is redefined daily in London. With a LBOR mortgage, the interest rate is adjusted at regular intervals to the development of LBOR . LBOR mortgages typically have fixed maturities, for example, six months. Since LBOR is a money market interest rate, such mortgage loans are also referred to as money market mortgages or rollover mortgages.

Tax tips for entrepreneurs and tax benefits for entrepreneurs

Start-ups do not just have to fight to establish themselves in the market. You also have to keep an eye on the many tax aspects of your job. In addition to the obligations, there is room for maneuver: from input tax flat rate deductibility to the deduction of anticipated operating expenses. But which are the best tax tips for entrepreneurs? Our guide explains.

The first steps in the tax office

The first steps in the tax office

Registration as a freelancer or trader?

Registration as a freelancer or trader?

Anyone who wants to become self-employed has the choice between registering as a freelancer or as a trader. Freelancers do not have to register a trade. Standard occupational groups include independent literary, artistic, teaching, educational or scientific activities . They offer or produce services, not goods.

Freelancers, full-time or part-time, have the following advantages over traders:

  • they pay no trade tax
  • they can apply for the actual taxation
  • you just have to create the revenue-surplus bill
  • they are not mandatory members in the IHK
  • There is no double entry bookkeeping
  • There is the possibility to be insured by the inexpensive artist social fund

This means that self-employed people such as retailers, restaurateurs, craftsmen, manufacturers and producers need to register a business to start their business. After registration of the trade, the tax office will be informed. The tax office will automatically send the questionnaire for tax collection . Many start as small entrepreneurs in the self-employment, which has the advantage, without bureaucratic effort to raise their own projects as a sideline. Depending on the industry and customers, the small business can lead to public perception of reduced professionalism. Small business owners also have higher business expenses since they are not allowed to deduct input tax from incoming invoices . This is critical during the foundation due to larger purchases. Whether the small business worth it, is best to clarify with a tax consultant.

The business registration questionnaire

As soon as a trade is registered, the tax office will send the questionnaire on taxation a few days later. While the general information on the sheet is unproblematic to answer, it becomes critical in the naming of their own income . These, together with possible investments, are difficult to calculate for start-up founders.

Therefore, a low annual profit or even the number 0 should stand. If the revenue is reported to the tax office, the four-year advance payments for income and trade tax based on the income can significantly increase. When it comes to the question of sales in the year of the start-up and the following year, the amount should be estimated lower .

The sales tax pre-announcement

VAT must be reported to the tax office monthly or quarterly with the advance VAT return. This process is repeated at the end of the year. The procedure is complicated by different tax rates . Every freelancer and self-employed person must pay sales tax on products and services offered. Of this, only the sales tax paid on goods and services purchased for the business may be deducted. This information is given in the VAT return . In addition, the VAT return will be submitted at the end of the year. Only the difference between value added tax and input tax is paid to the tax authorities .

In this case, the target taxation applies: An entrepreneur executes the sales tax when an invoice has been sent out. The receipt of payment has no relevance here. Freelancers such as lawyers, doctors and creative people do not have to declare their sales tax until payments have been received. Companies that face liquidity shortages can apply for this actual taxation if their turnover in the previous year did not exceed EUR 500,000. There is no legal claim.

The sales tax pre-registration is submitted electronically via the Elster Portal . It must be received by the tax office by the 10th day after the pre-registration period.

It is possible to apply for a time extension. The treasury is extremely meticulous in the VAT registration. If the pre-announcement is made more than once too late, a verifier quickly appears in the company. The submission of the VAT advance notice should be planned carefully. In order to avoid trouble with the tax office, it is necessary to check whether the correct tax rates of 7 or 19 percent are specified and whether the contributions of the annual declaration differ from the monthly or quarterly pre-registrations.

Tax advantages for entrepreneurs

Tax advantages for entrepreneurs

What tax benefits can founders use?

All purchases from the tool to the office equipment required by a company can be claimed for tax purposes. This may significantly reduce the tax liability . If these expenses exceed the income, the tax office partially refunds the VAT in full. Even low-value assets that cost no more than € 410 can save a lot of money.

1. Tax tips for start-up entrepreneurs: take account of EUR limits
Entrepreneurs may act only after a revenue surplus bill, if the sales below 600,000 euros and the profit is less than 60,000 euros. Freelancers are exempt from this rule.

2. Tax tips for entrepreneurs: The sales tax pre-notification
The monthly sales tax pre-registration is mandatory during the first two years of the business start-up. If the payload exceeds 7500 Euro, it will stay at the monthly rate. If it is lower, the pre-registration will be made quarterly. If it is up to 1000 euros, an annual turnover tax return is sufficient. Young entrepreneurs should take a close look at the limits and readjust if necessary.

3. Tax tips for entrepreneurs: anticipated business expenses
Already in the year before the foundation tax can be saved with losses and business expenses. All these costs may be reported to the tax office as anticipated operating expenses . Tax tips for start-up companies include the fact that the resulting losses can be tax-deductible with other income later charged.

Typical costs are:

  • Telephone, postage, copying
  • Technical literature around the foundation
  • Fees for tax consultants and lawyers
  • Costs for start-up seminars and founders fairs
  • Travel costs around the foundation

The founder of the business should explain to the tax office on an extra page how these costs relate to the foundation. If you start your own existence from unemployment , there is no positive income. The early operating expenses should still be recognized for tax purposes. Without income, a loss return is considered, which leads to tax savings, as soon as positive income with the business start-up is achieved.

4. Tax tips for entrepreneurs: Input tax flat rate
A self-employed person can calculate the profit of his company after a simple revenue-surplus calculation and show the VAT in the invoices. The sales tax from incoming invoices of other companies can be offset against input tax. If the annual turnover is less than € 61,356, the advantage of the input tax flat rate applies.

5. Tax tips for entrepreneurs: Small business regulation as a tax advantage
If the turnover does not exceed € 17,500 in the previous year and does not exceed € 50,000 in the current calendar year, the small business rules apply. This means that invoices do not have to show VAT, but no input tax may be deducted. Outgoing invoices and business expenses do not require a gross-net distinction. These processes reduce administrative overhead. Compared to private customers, there is a price advantage of 19 percent, which is lost to commercial customers.

6. Tax tips for entrepreneurs: Actual taxation: Application for actual taxation
If the sales are below € 500,000 per annum, start-up founders can apply for actual taxation. The VAT must first be paid to the Treasury, if the customer has paid.

When will there be a start-up grant?


The start-up grant from the employment office can help to get out of unemployment and set the starting point for a life as a successful entrepreneur. Anyone applying for unemployment benefit I may apply for it. Even those who receive other benefits under SGB II, can benefit if a residual entitlement to unemployment benefit of at least 150 days exists and unemployment is to be terminated by the start-up. The approval represents a discretionary performance. The mediator decides in individual cases on the promotion. Eligible are all self-employed activities that are to be exercised as a main occupation. The corporate concept must be sustainable and promise success. The expected profit must be sufficient to secure the existence.

Funding is provided in two phases. During the first phase of six months, the full ALG I will be paid , plus 300 euros for social protection. On the basis of the results presented during these six months, the Employment Agency examines the sustainability of the concept. The first goals from the business plan should have been achieved. If the decision is positive, this is followed by a further nine-month funding period . During the second phase, only the subsidy of 300 euros per month will be paid. Those who meet the requirements for the start-up grant require a completed application, a business plan and the plan for capital requirements and financing for the application. In addition, a sales and profitability forecast, the viability certificate, which represents an expert opinion, the CV of the founder and a proof that the self-employment has been registered with the commercial or tax office.

Benefits for employees of start-ups

Benefits for employees of start-ups

Especially in the initial phase founders like to rely on the help of family members in the company. Decisive for a possible advantage is the distinction between contractually defined, dependent employment relationships , family work without salary or co-entrepreneurship .

Family members can be marginally employed on 400 Euro basis . In dependent employment, social security contributions and payroll tax are payable. The family member is at the same time a health, care, – unemployed and pension insurance. Tax tips for start-up founders are then clear, the wage and labor costs as a personnel expense claim. The relative must be active in the company. His salary must be based on the tariff, local level . This also applies to working hours, because the authorities check very carefully here. If a member of the family helps out occasionally and receives compensation for it, it is family-friendly cooperation.

Family members who support business risk are considered co-entrepreneurs. For this reason, at the beginning of the activity , the subtleties of insurance law must be examined . In the event of discrepancies, entrepreneurs and family members must prove that they are actually employees because the tax office automatically classifies them as co-entrepreneurs . This means that despite paid contributions, there are no entitlements to social benefits. Paid contributions will be reimbursed within a period of four years.

French savings and SME financing

In France, regulated savings, ie all savings products (accounts and passbooks) whose operating conditions are set by the public authorities, rose by 5 billion in one year. Thus the total deposits on booklets A, booklet young, or on home savings plans (PEL), reached 705 billion, or 15% of the financial wealth of French households .

Savings products to its lowest level

Savings products to its lowest level

Nevertheless, the rate of return of these savings products has reached its lowest level in decades: 0.75% for Livret A today versus 4.5% in 1988. Or 1.0% for PEL against 6.0% 30 years ago … This paradox is even more obvious when we know that the average rate of these products is slightly lower than inflation, estimated by INSEE at 1.0% in 2017.

The Philippe government wants to double the share of investment for SMEs

The Philippe government wants to double the share of investment for SMEs

This shows the importance of this savings in the government’s economic choices. Indeed, the current policy is aimed at transferring these assets to the real economy. Stable and sustainable growth also means supporting businesses in their research and development projects, renovating their production facilities, recruiting, buying inventory or financing their cash flow.

Comparison of the distribution of household financial wealth (Observatory Report
of regulated savings – 2017)

Crowdlending, the alternative to savings booklets

Crowdlending, the alternative to savings booklets

French companies are in massive search of funds and start using the tools resulting from the digital transformation to finance themselves. Thus, crowdlending, or crowdfunding through the loan, has been made possible by both more favorable legislation, but also by adapted technology ensuring speed and transparency.

This crowdfunding is part of a societal approach because it gives individuals the opportunity to diversify their savings by financing the real economy. Thus, in a few clicks, an individual can become a player in the development of European companies.

More Cash family, the alternative financing platform for dynamic SMEs, allows you to support a company in its development. You can invest alongside institutional investors from 20 € to 2000 € per project.


How do banks calculate the maximum loan amount

The question of the maximum credit limit, which can be obtained at the bank, comes second to consumers after calculating the total overpayment. The loan calculator helps to determine the size of the payment, and the consumer can determine the maximum amount by himself. For this you need to know the principles of the banking algorithm.

The main parameters affecting the loan amount

The main parameters affecting the loan amount

When accounting for the maximum amount that a lender can issue, two main elements are used – income and expenses. To assess the creditworthiness of the bank, it takes into account only official cash receipts, which can be confirmed by any document, for example, a certificate of income on a bank form or on 2-NDFL form, a salary card, debit or current account statement.

Revenues accounted for by the lender: 

  • wage;
  • profit of an individual entrepreneur;
  • pension;
  • interest on the balance of deposits;
  • rent, if the borrower – the owner of the property.

Social benefits for unemployment and child care are not accepted in the calculations.

To account for expenses, banks use information from credit bureaus and loan applications. At the end of the banking questionnaire there is always a block with data on the current obligations of the consumer.

Consider several ways to determine the maximum loan amount.

Option 1 – the cost of living per person

Option 1 - the cost of living per person

Some banks independently determine what the minimum amount per month should remain with the borrower to stay after deducting all expenses. For Moscow, this figure is 10,000–15,000 rubles, for regions – 5,000–7,000 rubles. For example, a Moscow resident has a family of two people. Their total income is 40,000, then the payment per month should not exceed 20,000 rubles. (40,000 – 10,000 x 2).

To calculate the loan limit, multiply the payment by the number of months. So we know the amount of the loan body + interest. For example, the cost of the annual rate and payment of insurance is 20% per year. The term of the contract is 12 months. The maximum loan amount: 20,000 x 12 – 20% = 192,000 rubles. This method is used in rare cases.

Option 2 – the percentage of expenditure and income

Option 2 - the percentage of expenditure and income


The most famous and widely used method is the allocation of a share of income that can be spent on monthly payments. The value of the indicator in each bank is different, but the principle is the same.

The average spending limit is set at 40-45% of the family budget. That is, with an income of 40,000 rubles. Monthly payment should be in the range of 16 000-18 000 rub. (40,000 x 40%). For this approach, it does not matter how much the borrower earns, even if his income exceeds 100,000, the allowable share of costs will not exceed 45%.

Banks divide this method of calculation into two types:

  • 45% – the amount of payments on all credit obligations, including already existing ones;
  • 45% – payment under the contract that the client is only going to make.

For example, a customer has a commodity credit, for which he pays 9,000 rubles. per month. Monthly income of the consumer is 31,000 rubles. Calculate the maximum payment for a new loan: 31,000 x 45% – 9000 = 4950 rubles. Multiplying the payment by the estimated time, we get the future amount of the loan, taking into account the overpayment. Perhaps a loan for 24 months and the amount – 118,800 rubles.

The second approach is a better offer: 31,000 x 45% = 13,950 rubles. per month.

Important! Banks equate credit cards to already existing obligations, even if the client did not use the limit or overdraft. Creditors assume that the client can use funds from the card account at any time and increase the amount of the debt. The expenses take into account the minimum payment of 5-10% of the credit card limit.

The maximum loan amount is specified in the terms of the loan product, and the minimum should provide a balance of income not less than the subsistence minimum for the region after deducting the monthly payment.

Factors with indirect influence on the limit 


Each credit and financial organization has an internal regulation, according to which one or other data of the applicant is taken into account. In addition to the basic income and loan payments, there are several other parameters that affect the maximum limit.

Some banks deduct from the family budget:

  • utility payments in the amount corresponding to the area of ​​the property;
  • the amount of daily expenses;
  • fuel and vehicle maintenance;
  • payment of rental housing;
  • expenses for children and other dependents;
  • alimony.

Many financial institutions take into account additional parameters that may affect the increase in credit limit. The positive components of creditworthiness include:

  • availability of collateral;
  • insurance against job loss;
  • attraction of guarantors;
  • participation of co-borrowers;
  • positive credit history;
  • increase the term of the contract.

If the borrower can provide collateral – a vehicle or real estate, the lender is ready to increase the size of the loan by 20-25% of the previously stated amount. The guarantee is equal to security of individuals, which guarantees the bank the return of borrowed funds.

When a client attracts co-borrowers, usually when making a mortgage or a consumer loan for a large amount, the financial institution takes both applicants into account. The limit in this case may increase by 20-30%.

Voluntary life and health insurance, as well as the risk of losing your job, is a common method of reducing the rate and increasing the limit. If the client needs to receive the maximum possible amount, one should go towards the bank by agreeing to additional services.

Another way to increase the limit is to ask a loan officer to issue a contract for a longer period. Due to this, the monthly payment will decrease, and payments will be made possible by the borrower.

Banks hide the exact algorithm for calculating the individual loan amount. This information is hidden in order to prevent fraudulent actions by unscrupulous consumers. Approximate credit limit can be found by the ratio of income and expenses or by using a loan calculator, which takes into account these parameters.