Terms, briefly explained.
The words that come up around wealth, property and retirement in Germany, each in one or two sentences and linked to the guide that goes deeper. Wertavo explains, it does not recommend.
A
- Advance lump sum (Vorabpauschale)
- A minimum return on accumulating funds that is taxed every year, based on the base rate (3.20 % for 2026). It is credited when you sell. More in Extra repayment or ETF?
- Annuity loan
- A loan with a constant payment made up of interest and principal. With every payment the interest share falls and the principal share rises. More in When the fixed rate ends
C
- Cash flow after debt service
- What is left of the cold rent after non-recoverable costs, interest and principal. Positive means the property carries itself. More in Cash flow after debt service
- Cold rent
- The rent without operating and heating costs. The basis for rental yield and cash flow. More in How to calculate rental yield
- Core-satellite strategy
- A portfolio made of a broad, cheap core, such as a global equity ETF, and a few deliberately chosen satellites. More in What is a core-satellite strategy?
D
- Debt service
- Interest plus principal, in other words the loan payment. More in Cash flow after debt service
- Depreciation (AfA)
- The tax write-off of a let building over its useful life: usually 2 % of the building’s acquisition cost a year, 2.5 % if completed before 1925, 3 % from 2023. Land is not depreciated. More in Depreciation on rental property
E
- Extra repayment
- A repayment on top of the regular payment; during the fixed-rate period only as far as the contract allows, usually 5 % of the loan amount a year. More in Extra repayment or ETF?
F
- Fixed-rate period
- The period for which a loan’s interest rate is fixed, often 10 or 15 years. After that, the remaining debt is financed on new terms. More in When the fixed rate ends
- Flat tax on investment income (Abgeltungsteuer)
- The German tax on interest, dividends and capital gains: 25 % plus solidarity surcharge, 26.375 % in total, plus church tax where applicable. More in Extra repayment or ETF?
- Follow-up financing
- Financing the remaining debt when the fixed-rate period ends, either with the current bank (renewal) or with another one (switching). More in When the fixed rate ends
- Forward loan
- A loan whose rate is fixed today for follow-up financing that starts in the future, in return for a surcharge on the rate. More in When the fixed rate ends
G
- Gross rental yield
- Annual cold rent divided by the purchase price, times 100. Quick to calculate, but without purchase costs, management and maintenance. More in How to calculate rental yield
L
- Leverage effect
- A loan raises the return on equity as long as its rate is below the return of the property, and lowers it when the rate is above. More in How to calculate rental yield
- Loan-to-value
- The loan relative to the value the bank assigns to the property. The lower it is, the better the rate tends to be; typical thresholds are 60, 80 and 90 %. More in How much house can I afford?
M
- Maintenance reserve
- The owners’ association’s reserve for repairs to common property, paid monthly with the service charge. For tax, it only becomes deductible once the money is spent. More in Cash flow after debt service
- Market value
- The price a property would fetch on the market. Net worth uses the market value, not the purchase price. More in Calculating your net worth
- Median
- The middle value: half lie below, half above. For wealth it says more than the average, which a few very high values pull up. More in Net worth by age: what is normal?
- Monte Carlo simulation
- A method that runs thousands of possible market paths. The result is not a forecast but a probability. More in When can I retire?
N
- Net rental yield
- Annual cold rent minus non-recoverable costs, divided by the price plus purchase costs, times 100. More in How to calculate rental yield
- Net worth
- Everything you own minus everything you owe: property at market value, portfolios, accounts and pensions, less remaining debt. More in Calculating your net worth
- Non-recoverable costs
- Costs the landlord carries and may not pass on to the tenant, such as management, maintenance and the maintenance reserve. More in Cash flow after debt service
P
- Partial exemption
- For equity funds and equity ETFs, 30 % of the income stays tax-free; the flat tax only applies to 70 %. More in Extra repayment or ETF?
- Pension gap
- The difference between spending in retirement and what the pension and other income bring in after deductions. More in Calculating your pension gap
- Pension level (Rentenniveau)
- The standard pension after 45 years on average earnings relative to current average earnings, before tax. Fixed by law at no less than 48 % until the 2031 adjustment. More in Calculating your pension gap
- Prepayment penalty
- Compensation a bank can demand when a fixed-rate loan is repaid before the fixed period ends. Ten years after full payout it no longer applies. More in When the fixed rate ends
- Price-to-rent ratio
- The purchase price divided by the annual cold rent, the inverse of the gross yield. A ratio of 25 equals 4 % gross. More in How to calculate rental yield
- Principal
- The part of the loan payment that reduces the debt. It lowers cash flow, but not your wealth. More in Cash flow after debt service
- Purchase costs
- Transfer tax, notary, land registry and an agent where applicable, together about 5 to 12 % of the price. Banks rarely finance them. More in How much house can I afford?
R
- Real estate transfer tax
- Tax on buying property in Germany, 3.5 to 6.5 % of the price depending on the state. The date of the notarised purchase contract decides the rate. More in How much house can I afford?
- Remaining debt
- The part of a loan not yet repaid at a given time, for example when the fixed-rate period ends. More in When the fixed rate ends
- Return on equity
- The gain relative to your own money invested. For property it depends heavily on what counts as the gain: cash flow only, principal too, or value growth as well. More in Cash flow after debt service
S
- Saver’s allowance
- Investment income up to €1,000 a year stays tax-free, €2,000 for couples filing jointly. More in Extra repayment or ETF?
- Sequence of returns risk
- The risk that bad market years come right at the start of retirement. Withdrawing then means selling at the bottom, and that money is missing in the recovery. More in The 4 % rule: how much can I withdraw?
- Service charge (Hausgeld)
- The monthly amount flat owners pay to the owners’ association: operating costs, management and the maintenance reserve. Part of it can be passed on to tenants. More in How to calculate rental yield
T
- Ten-year rule (Spekulationsfrist)
- The gain on selling a property is tax-free if more than ten years lie between the purchase and sale contracts, or if the owner lived in it recently. More in Selling property: the 10-year rule
W
- Withdrawal rate
- The share of wealth withdrawn in the first year of retirement; the amount then usually rises with inflation. The best-known example is the 4 % rule. More in The 4 % rule: how much can I withdraw?