Anyone financing a property with a bank loan sooner or later comes across the term mortgage lending value (Beleihungswert). It determines how much a bank will lend at all and at what interest rate. It is deliberately set more cautiously than the market value (Verkehrswert), which reflects the price achievable on the market today. This guide explains how the two values are connected, how banks determine the mortgage lending value and why it is so important for your financing.
What is the mortgage lending value?
The mortgage lending value (Beleihungswert) is the value a bank assigns to a property as a permanently secure loan collateral. Unlike a current daily market price, it reflects which value can probably be reliably achieved over a long period — even if the bank should one day have to realise the property in an emergency.
The decisive factor is therefore the principle of cautious valuation: only the long-term, sustainable characteristics of a property such as location, building fabric, layout and usability are taken into account. Short-term price peaks, cyclical exaggerations or speculative expectations, on the other hand, are left out. This is precisely why the mortgage lending value is generally lower than the market value.
For the bank, the mortgage lending value is the central calculation figure. It determines up to what amount a loan is secured by the property — and thus how much it finances on what terms.
Mortgage lending value and market value: the decisive difference
Mortgage lending value and market value (Verkehrswert) are often confused in everyday use, but they describe two very different things.
- Market value / Verkehrswert: the price that could actually be achieved in ordinary business dealings as at the valuation date. It is a market price tied to a reference date and follows the current market situation.
- Mortgage lending value: the cautiously estimated value that can be sustainably achieved over the long term, without speculative elements. It is deliberately conservative and does not fluctuate with every market movement.
From this different logic follows the rule of thumb: the mortgage lending value is almost always below the market value. The difference is the bank's safety buffer. In sharply rising markets the gap can grow, because the bank does not factor price exaggerations into the collateral.
Important to know: a well-founded assessment of the market value is the basis on which you can place the bank's mortgage lending value in context at all. As an estate agent, Richter Immobilien-Transaktionen provides owners with a data-based market value assessment — the determination of the mortgage lending value itself is carried out solely by the financing bank.
How banks determine the mortgage lending value
For Pfandbrief banks, the determination of the mortgage lending value is strictly regulated by law. The relevant provisions are § 16 of the Pfandbrief Act (PfandBG) and the supplementary Mortgage Lending Value Determination Ordinance (BelWertV).
§ 16 PfandBG stipulates that the mortgage lending value may not exceed the value that results from a cautious assessment of the future saleability, taking into account the long-term, sustainable features of the property and the normal regional market conditions. Speculative elements are expressly excluded. At the same time, the rule applies: the mortgage lending value may not exceed the duly determined market value. The valuation must also be carried out by an expert appraiser who is independent of the credit decision.
The BelWertV makes this concrete and lays down the permitted methods — the comparative value, income value and asset value methods, each in the cautious form required under Pfandbrief law. Banks that are not subject to Pfandbrief law determine the mortgage lending value according to their own, similarly conservative principles.
The safety deduction: why around 10 percent is deducted
In practice, many banks derive the mortgage lending value from the market value and deduct a safety deduction. A magnitude of around 10 percent is common; depending on the property and the bank, the deduction can also be higher.
A simplified example illustrates the effect:
- Market value / purchase price: 400,000 euros
- Safety deduction of around 10 percent
- Mortgage lending value: around 360,000 euros
The deduction is not a sign of distrust towards your property, but a risk buffer: it is intended to cushion market fluctuations and ensure that the collateral remains sufficient even if prices temporarily decline. Depending on the data situation and the location of the property, the actual deduction can deviate from the rule of thumb.
Lending limit and loan-to-value
Two further terms build on the mortgage lending value and play a central role in financing discussions.
- Lending limit (Beleihungsgrenze): the maximum share of the mortgage lending value up to which a bank bases a loan on the property. For covering mortgage Pfandbriefe, Pfandbrief banks may only count loans up to 60 percent of the mortgage lending value. In classic property financing, banks often lend up to around 80 percent of the mortgage lending value.
- Loan-to-value (Beleihungsauslauf): the actual ratio of the loan amount to the mortgage lending value, expressed as a percentage. It describes how far a specific financing exhausts the possible scope.
A calculation example: with a mortgage lending value of 360,000 euros and a loan of 288,000 euros, the loan-to-value is 80 percent (288,000 divided by 360,000). The lending limit is thus the maximum scope set by the bank, the loan-to-value the individually used share of it.
How mortgage lending value and loan-to-value determine the interest rate
The loan-to-value is one of the most important levers for your interest rate. Banks tier their terms according to risk — and the risk decreases the less loan rests on a mortgage lending value.
As a guideline: if the loan-to-value is below around 60 percent, you generally receive the best terms. Above this threshold, the interest rate typically rises in steps, the higher the loan-to-value becomes. A high loan-to-value near or above 90 percent means a greater loss risk for the bank and accordingly leads to noticeable interest surcharges.
In simplified terms, the logic can be summarised as follows:
- low loan-to-value = more equity = lower risk = cheaper interest rate
- high loan-to-value = little equity = higher risk = higher interest rate
Even reaching the next lower tier — for example dropping below 60 or below 80 percent — can measurably improve the terms.
Impact on equity and financing
Because the mortgage lending value determines the maximum loan amount, it has a direct influence on your equity requirement. The lower the mortgage lending value relative to the purchase price and the lower the lending limit, the more you have to contribute from your own funds.
Back to the example: with a purchase price of 400,000 euros, a mortgage lending value of 360,000 euros and lending up to 80 percent, the bank finances a maximum of 288,000 euros. You contribute the remaining 112,000 euros as equity — in addition there are the incidental purchase costs such as real estate transfer tax, notary and land register, which are usually also covered from equity.
More equity lowers the loan-to-value and thus the interest rate. Anyone who realistically knows the value of their property can therefore plan their financing better. For owners who want to sell or assess their property, Richter Immobilien-Transaktionen provides a well-founded, data-based market value assessment as a sound starting point.
