Job loss and mortgage refinancing: how to stress-test your German rental investment

The two largest risks in a financed rental property rarely come from the apartment. They come from your household income and from the interest rate you are offered when your fixed rate ends. You can test both before you buy. How many months could you carry the property if a salary stopped? And what would the loan cost at a higher rate on the debt that remains at refinancing?

If the answers only work when everything goes right, the property is too large for the household or the timing is wrong. No reserve fixes that. This guide works through both tests with one illustrative example.

A German mortgage usually has a fixed interest rate (Sollzinsbindung) for 10 or 15 years, but full repayment takes much longer. When the fixed period ends, the remaining debt needs follow-on financing (Anschlussfinanzierung) at whatever rate is available then. You know that date from the day you sign.

Income risk has no date. A redundancy, illness or a partner's move can arrive in year two or year nine. The tests below treat the two risks separately, then together.

Illustrative example. Fictional figures, not a real property, offer or forecast.

The apartment is the Leipzig example from our rental property cash-flow guide: a €216,000 loan at an assumed 3.7 per cent nominal rate, fixed for 10 years, with 2 per cent initial repayment, costing €1,026 a month. After rent, owner-paid costs and allowances, the owner tops it up by €341 a month before tax. When the apartment is empty, the full €1,391 of loan payment, service charge (Hausgeld) and management leaves the owner's account.

The household is a couple with net incomes of €2,900 and €2,200 a month. Regular spending is €4,300, of which €3,500 is essential: their own rent, food, insurance, transport and fixed commitments. That leaves €800 before the property and €459 after it. After buying, they hold €16,500 in reserves: €10,500 for the household and €6,000 for the property, as described in how much money you need to buy a rental property.

In each adverse case, the household cuts spending to essentials.

Inputs: unemployment benefit assumed at €1,300 a month for the partner earning €2,200 net; the employment agency calculates the actual amount. Tax is excluded. Relief on a rental loss arrives with the annual assessment, and a lower income reduces its value.

The second column holds only while the benefit lasts and only if the household really cuts €800 of spending. The next two show how quickly that changes. An empty apartment at the same time more than doubles the shortfall.

The months assume both reserves are pooled, which leaves nothing for a repair or a special levy (Sonderumlage) in the same period.

The "both incomes lost" column is less remote than it looks if:

• both partners work for the same employer or in the same sector;
• one partner's residence permit depends on the other's;
• a new job elsewhere means one partner resigns so that both can move.

Run the test with the larger income removed, not only the smaller one. In this example, losing the €2,900 salary with no benefit gives −€1,641 a month, and the reserves last about 10 months.

Unemployment benefit (Arbeitslosengeld) replaces part of a salary. It is not linked to your mortgage. It is 60 per cent of a flat-rate net pay figure, or 67 per cent with a child (§ 149 SGB III), and the pay counted is capped at the contribution ceiling, €8,450 a month in 2026 (§ 341(4) SGB III; Federal Government). It requires at least 12 months of insured employment in the previous 30 (§§ 142, 143 SGB III) and, for most claimants under 50, lasts up to 12 months (§ 147 SGB III). Resigning can suspend it for up to 12 weeks (§ 159 SGB III). Register as a job seeker at least three months before your job ends, or within three days of learning the end date (§ 38(1) SGB III).

Payment protection insurance (Restschuldversicherung) may pay loan instalments for a limited time after job loss or illness (BaFin). Policies often contain extensive exclusions and waiting periods, and the consumer advice centres describe the product as expensive with limited benefits (Verbraucherzentrale). Neither belongs in a stress test as a certainty.

After 10 years of payments in the example, about €52,200 has been repaid. The remaining debt is about €163,800. That is the figure the new rate applies to, not the original €216,000.

For context, the Bundesbank's average effective rate on new housing loans with an initial fixation of over 10 years was 3.92 per cent in July 2026 (provisional), against 1.75 per cent in July 2016. Since the series began in January 2003, the monthly average has ranged from 1.11 per cent (December 2020) to 5.38 per cent (January 2003) (Bundesbank). These are averages of new agreements, excluding fees; an individual offer will differ. The test does not predict a rate (see mortgage interest rate trends). It asks what you could carry.

Rent and all other costs held at today's figures for comparison. In practice, both will have changed after 10 years.

A higher rate leaves two choices: pay more each month, or keep the payment and stay in debt longer. At 6 per cent, keeping €1,026 adds more than eight years. At 7 per cent, it would stretch the remaining term to about 38 years.

The household can absorb €203 more from its €459 margin in normal times, but not easily alongside a lost income. At 6 per cent, the "one income lost, no benefit" result becomes −€1,144 a month, and the reserves last about 14 months instead of 17.5.

• Staying with your lender (Prolongation). The lender must tell you at least three months before the fixed rate ends whether it will offer a new fixed rate, and at what rate (§ 493(1) BGB).
• Switching lender (Umschuldung). You can terminate with one month's notice to the end of the fixed period. With a fixation of more than 10 years, you may also terminate 10 years after full disbursement with six months' notice (§ 489(1) BGB). A new lender assesses your income again, so a job loss near the refinancing date may leave only your current lender's offer.
• Forward loan (Forward-Darlehen). A rate agreed now for a loan paid out later, usually with a surcharge (Verbraucherzentrale). It removes rate uncertainty and commits you even if rates fall.
• No new agreement. The loan may continue at a variable rate. In July 2026, the Bundesbank average for floating rates and fixations of up to one year was 4.41 per cent, above the longer fixations.

Selling during the fixed period is possible where you have a legitimate interest, but the lender can claim early repayment compensation (Vorfälligkeitsentschädigung) (§ 490(2) BGB; § 502 BGB).

These options cost little to agree before signing. None applies unless it is in your contract:

• Repayment-rate change (Tilgungssatzwechsel): a lower repayment rate reduces the payment and extends the term.
• Special repayments (Sondertilgung): reduce the remaining debt before refinancing. Do not make them from your reserves.
• Repayment holiday (Tilgungsaussetzung): interest only, for an agreed period.

Reductions and repayment holidays are negotiated, not guaranteed (Verbraucherzentrale). For a consumer real-estate loan, the lender may terminate for payment default only when at least two consecutive instalments are in arrears, the arrears reach at least 2.5 per cent of the loan amount and a two-week deadline has passed. It should also offer to discuss an agreed solution (§ 498 BGB). In the example, 2.5 per cent is €5,400, about five monthly payments.

That threshold is a last line, not a plan. Arrears incur default interest (§ 497(4) BGB) and can damage your credit record, and a terminated loan can end in the forced sale of the property.

If your residence permit is based on your job, a job loss is also an immigration question. Holders of employment-based permits must tell the foreigners' authority (Ausländerbehörde) within two weeks when that employment ends early (§ 82(6) AufenthG), and the authority may shorten a permit whose basis has fallen away (§ 7(2) AufenthG). Take immigration advice promptly. A move abroad also raises lender, tax and management questions; see what happens to your rental property if you move abroad.

A reserve buys time. It cannot turn a property the household cannot carry into one it can. If the test shows that the property works only while both salaries continue and the refinancing rate stays low, consider a cheaper apartment, more equity, a longer fixed rate, or waiting.

What happens to my mortgage if I lose my job in Germany?

Nothing changes automatically; payments remain due. Contact the lender early and check your contract for repayment-rate changes or holidays. Termination for arrears requires strict statutory conditions, but arrears carry costs well before that point.

Does unemployment benefit cover my mortgage?

No. It replaces part of your salary for a limited period, subject to eligibility. Treat it as partial household income at most.

How do I estimate my payment after the fixed rate ends?

Take the projected remaining debt from your repayment schedule (Tilgungsplan), not the original loan, and apply a range of rates. Then compare paying more each month with keeping the payment and extending the term.

Is a longer fixed-rate period safer?

It postpones refinancing risk, usually at a higher rate. In July 2026, the Bundesbank average was 3.92 per cent for fixations over 10 years and 3.78 per cent for 5 to 10 years. With a fixation of more than 10 years, you can still terminate after 10 years with six months' notice.