Taxes & finances for owners
Property owners must not only keep an eye on the building, but also on the financial situation surrounding it: interest rates, loans, taxes and other factors affect the property as an investment. In recent years, the sector has been particularly affected by rising interest rates. What does this mean for you as a property owner? This guide provides an overview of how interest rate changes affect you and what you should bear in mind when it comes to taxes and finances.
Rising interest rates – what has happened?
For a long time, real estate loans only knew the downward path, but since 2022 there has been a turnaround: inflation has risen sharply and the European Central Bank (ECB) has raised the key interest rate significantly in several steps. While the key interest rate was still at 0% at the beginning of 2022, it is now (as of May 2025) in the region of several percentage points. This development has a direct impact on mortgage lending:
- Loans are becoming more expensive: banks are borrowing more money from the ECB and passing on the higher interest rates to borrowers. The days of 1% interest for a property loan are over – interest rates are currently often in the 3-4% range or even higher, depending on the term and credit rating.
- Monthly installments are rising: If you have a property loan with a variable interest rate or an expiring fixed interest rate, you will clearly feel the increase. If, for example, an old loan with a fixed interest rate of 1.5% expires and now has to be refinanced at 4%, the monthly installment can increase drastically if the repayment remains the same.
- Demand on the real estate market is cooling: rising interest rates mean that fewer people can afford financing or are granted less credit by the bank. Many buyers are thinking twice, as loans are more expensive.
As a result, property prices are coming under pressure or at least stagnating. In some regions, slight price declines have been observed since 2022, particularly for very highly valued properties.
Effects on owners
There are two main aspects for owners: their own financing and the value/sale of the property.
- Own real estate financing: If your fixed interest rate expires soon, check the follow-up financing early on. A forward loan can secure current interest rates. Important: Calculate future installments realistically and check alternatives in case you run into financial difficulties. Talk to your bank or an advisor in good time.
- Selling price of the property: When selling your property, you should bear in mind that buyers have become more selective. Prime locations are still in demand, properties with defects take longer and sometimes achieve lower prices. A realistic asking price is crucial – asking prices that are too high are a deterrent. Good presentation and a fair market valuation are more important today than ever.
Strategies for dealing with expensive follow-up financing
Many homeowners are faced with the following problem: the previous real estate loan expires, but the new interest rate is much higher. This threatens to result in unaffordably high installments. Here’s what you can do:
- Plan debt restructuring carefully: Obtain offers from various banks, not just from your current bank. Sometimes the house bank does not offer the best conditions. An independent mortgage advisor can help you keep an overview.
- Adjust the repayment rate: If the interest rate rises, you could consider lowering the initial repayment rate to keep the installment affordable. Example: Instead of 3% repayment, perhaps only 2%. This extends the overall term, but keeps the monthly repayments within reasonable limits. Please note, however, that a lower repayment rate means higher interest costs over time.
- Use unscheduled repayments: If you have savings, you can make an unscheduled repayment before the end of the fixed interest period (if contractually permitted) to reduce the remaining debt. The follow-up financing will then be lower.
- In the worst case, sell: If it becomes clear that you will not be able to pay the new installment in the long term and no remodeling is possible, consider selling in good time. If you sell the house
before you are forced to do so, you will achieve better prices and can pay off the debt. Selling under pressure (up to and including foreclosure) usually results in financial losses.
Tax aspects of real estate sales
In addition to interest, owners should also be aware of tax rules, such as speculation tax: if you sell a property that was not owner-occupied within 10 years of purchase, income tax may be payable on the profit. Exceptions: You have lived in the property yourself for at least the year of sale and the two preceding years – then the sale is tax-free. The 10-year period applies strictly to rented properties.
Another point is the new property tax reform. Owners must make adjusted property tax payments based on the newly declared property values. Check your property tax assessment and lodge an appeal if there are any discrepancies. Although this affects the running costs rather than the value of the property, higher property tax can be passed on to the ancillary costs for rental properties, for example.
Staying financially fit as a property owner
To summarize, here are a few tips for being financially smart with your property:
- Build up a reserve: Always have a financial buffer ready for repairs, modernization or changes in interest rates. Unexpected expenses (broken heating, roof repairs) often occur, and then you’ll be glad to have reserves.
- Check insurance policies: Make sure you are properly insured – term life insurance, for example, can pay off your loan in the event of your death and protects your surviving dependents from debt. Homeowners insurance with natural hazard protection protects you financially in the event of damage to your home.
- Taxing rental income: If you rent out, remember to pay income tax on rental income. Income-related expenses (depreciation, interest, maintenance) can be offset. Good bookkeeping helps to avoid paying too much tax. If necessary, get help from a tax advisor to take advantage of all legal deductions.
- Consider real estate as part of your retirement provision: Plan for the long term. Will your property be paid off by retirement age? Can you afford the running costs even then? If necessary, consider today whether you would like to downsize in old age or use an annuity (see the “Living in old age” guide).
Conclusion: Rising interest rates and changing financial conditions are part and parcel of owning real estate. However, with early information, smart planning and professional advice (bank, tax advisor, estate agent), you can deal with them confidently. Stay financially flexible and regularly look beyond the “real estate mirror” – this will ensure the long-term success of your property.
Are you worried about interest rates, financing or taxes relating to your property? Talk to us! Our experts will analyze your situation and show you solutions – for sustainable finances as a property owner.
FAQ – Frequently asked questions about taxes & finances for owners
If your fixed interest rate expires soon or the interest rate is variable, your monthly installment can rise sharply – e.g. over €400 more for a remaining debt of €200,000. Calculate scenarios at an early stage and check your financial sustainability. You should plan follow-up financing at least one year before the loan expires. Adjustments such as a reduction in repayments are also often possible with the bank.
The real estate markets have cooled with the rise in interest rates, but a sale can still make sense – it depends on your personal situation. Important: Expect slightly longer marketing times and price-sensitive buyers. With a realistic asking price and good marketing, properties will still find buyers. Although prices in many regions are no longer at an all-time high, they are still at a high level.
It depends on the circumstances. In the case of owner-occupied properties, the sale is generally tax-free, no matter how high the profit is – provided you lived in the property yourself in the year of the sale and the two previous calendar years (in which case the owner-occupier rule applies). The speculation period applies to rental properties: if more than 10 years elapse between purchase and sale, the profit is tax-free. If you sell earlier, speculation tax applies, i.e. the profit is taxed as income at your personal tax rate.
1) Discussion with the bank: A solution can often be found, e.g. extending the fixed interest rate slightly or reducing the repayment.
2) Use a forward loan: If your fixed interest rate ends soon, you may be able to secure an even slightly lower interest rate in advance if the forecast is for further increases.
3) Consider selling the property: If it is foreseeable that the new rate will permanently exceed your budget, it may be better to voluntarily sell the property now.
4) Check renting: If you can/must move out and can hand over the property to tenants, rental income could cover the loan.
5) Consumer protection & advice: Don’t be afraid to ask a debt advice center or consumer advice center for advice before things get too bad.
1) Residential building insurance – it covers fire, mains water, storm/hail, optional natural hazards (flooding, heavy rain, etc.).
2) Liability insurance – as a homeowner (especially of multi-family houses), homeowner and landowner liability insurance is important in case someone is injured on your property (e.g. slips on black ice).
3) Term life insurance – if you have a large loan and a family, at least the main earner should be insured.
4) Legal protection insurance (real estate) – can be useful if you rent (tenant legal protection) or generally for owner disputes (e.g. with neighbors, authorities).
5) Household contents insurance – protects your household contents (furniture, appliances) against risks such as burglary, fire and water damage. Not directly for the building, but important for you as a resident.
Table of contents
Click on a section to jump directly to it.
