From the ESIS sheet to withdrawal: taking out a German mortgage loan

On Monday 2 March 2026 a couple sign a €320,000 loan with their bank to buy a flat, secured by a land charge. They receive their copy of the contract the same day. In February 2027 an adviser notices that the contract lacks the mandatory information on the right of withdrawal. The couple assume they can now withdraw whenever they like. The law disagrees: the right lapses at the latest at the end of 16 March 2027.

What a consumer real estate loan is

The BGB knows two kinds of consumer loan. Section 491(1) BGB names them: the general consumer loan (Allgemein-Verbraucherdarlehen) and the consumer real estate loan (Immobiliar-Verbraucherdarlehen). Many rules apply to both, such as written form and the right of withdrawal. At numerous points, however, the statute departs from them for home loans, and those departures are what this course is about.

Under section 491(3) BGB, a consumer real estate loan is a loan for consideration granted by a business as lender to a consumer as borrower. One of two features must be added: security by a charge over land (Grundpfandrecht) or a rentcharge (Reallast), or a purpose directed at land, buildings or rights equivalent to land.

The second alternative covers acquiring or preserving ownership of land and of existing or future buildings. A loan to buy a flat is therefore caught even if, unusually, the bank takes no land charge. Conversely, the land charge alone is enough: a loan secured on real property remains a consumer real estate loan whatever the money is spent on.

Section 13 BGB defines the consumer; the course on late payment explains it. In practice, when a GmbH borrows to buy a warehouse, none of the protective rules described here applies. When a self-employed woman privately finances her family home, she is a consumer under that contract, even though she runs a business in her working life.

Section 491(3) BGB expressly leaves out two groups. One is loans an employer grants its staff below market rate as a side benefit of employment and offers to no one else. The other is certain equity release loans in which the lender asks for repayment only after the consumer's death and is paid out of the later sale proceeds.

Before signing: the ESIS sheet, the draft and the explanations

Section 491a(1) BGB obliges the bank to inform the borrower in line with Article 247 of the Introductory Act to the Civil Code (EGBGB). For a home loan this starts with a request. Under Article 247 section 1(1) EGBGB it must say which information and supporting documents it needs, and by when, to carry out the creditworthiness assessment.

The same provision calls for a warning: the creditworthiness assessment is mandatory for the contract, and it can only be carried out if the documents requested are supplied correctly and in full. Anyone who hides earnings records or existing loans therefore puts at risk not only the offer but also the protection they would enjoy if the assessment were flawed.

Once the bank has the information, Article 247 section 1(2) EGBGB requires it to send the pre-contractual information in text form without undue delay, and in good time before the customer's contractual declaration. A fixed form is prescribed: the European Standardised Information Sheet set out in Annex 6 to the EGBGB, known as the ESIS sheet.

Because the template is identical across Europe, offers from different banks can be compared line by line. The bank must also attach the sheet to every offer and every binding proposal, unless the customer has already received one reflecting exactly those terms. Every binding proposal is to be provided in text form.

Under Article 247 section 1(3) EGBGB, any further information belongs in a separate document. It must clearly state that the bank may assign its claims and transfer the contract to a third party without the customer's consent unless the contract excludes this. If the bank turns the loan down, paragraph 4 requires it to say so without undue delay.

Under section 491a(2) BGB the customer may ask for a draft contract once the bank is willing to conclude. For home loans the statute goes further: when the bank makes an offer or a binding proposal, it must itself offer to hand over a draft. Where there is no right of withdrawal, it must actually hand one over.

Section 491a(3) BGB adds a duty to explain. The bank must explain enough for the customer to judge whether the contract fits their purpose and financial situation. That covers the main features of the loans on offer, their typical effects and, expressly, the consequences of payment arrears, which the second module deals with.

Section 492(1) BGB requires the contract to be in writing unless a stricter form applies. It must contain the particulars required by Article 247 sections 6 to 13 EGBGB. The customer then gets a copy and, for a fixed term, may ask for a repayment schedule at any time. Later statements by the bank go on a durable medium.

The creditworthiness assessment and what a breach costs

Before any consumer loan, section 505a(1) BGB requires the bank to assess creditworthiness. For home loans the test is stricter. The bank may only conclude if the assessment shows it is likely that the customer will meet their obligations under the contract as agreed. For a general consumer loan it is enough that there are no significant doubts.

Section 505b(2) BGB states what the assessment rests on: necessary, sufficient and proportionate information on income, expenditure and the customer's other financial and economic circumstances. The bank must assess thoroughly and take due account of the factors relevant to whether the customer is likely to be able to repay.

One sentence of that provision matters most. The assessment must not rely mainly on the home being worth more than the loan, or on the expectation that its value will rise. The only exception is a loan to build or renovate the home. A house on its own therefore does not carry a loan; what matters is the ongoing income.

Under section 505b(3) BGB the bank may draw the information from internal and external sources, including what the customer tells it and what the customer told a credit intermediary. It must check the information appropriately, where necessary against independently verifiable documents. Paragraph 4 requires the procedures and information to be laid down, documented and the records kept.

For home loans secured by a charge over land or a rentcharge, section 505c BGB adds duties. The bank must apply reliable standards when valuing residential property. Its valuers must be professionally competent and independent enough from the lending process to value objectively. Valuations must be documented and kept on a durable medium.

If the bank fails in its duty to assess, section 505d(1) BGB applies. An agreed fixed borrowing rate falls to the customary capital market rate for mortgage and public-sector covered bonds (Pfandbriefe) with a term matching the fixed-rate period. A variable borrowing rate falls to the rate at which European banks lend each other three-month money in euros.

In that case the customer may also terminate at any time without notice, and owes no early repayment compensation. The bank must give them a copy of the amended contract. All of this falls away, however, if the loan could have been granted even after a proper assessment. The sanction therefore only hits loans that careful scrutiny would have refused.

If the customer later cannot pay, and this rests on a circumstance that a proper assessment would have led to a refusal, section 505d(2) BGB bars the bank from claims for breach of duty. Under paragraph 3, however, neither paragraph applies where the customer intentionally or with gross negligence gave the bank false information or withheld it.

The right of withdrawal: 14 days, but not always from signature

Section 495(1) BGB gives the borrower under a consumer loan a right of withdrawal under section 355 BGB. If they withdraw in time, neither side remains bound by its contractual declaration. Withdrawal is made by a statement to the bank that clearly shows the decision to withdraw. No reasons need to be given.

Receipt by the bank is not what counts for the deadline. Section 355(1) BGB is satisfied by sending the withdrawal in time. A registered letter posted on the last day of the period therefore meets it, even if it arrives two days later. In a dispute everything turns on proof of dispatch, so use a traceable method.

Under section 355(2) BGB the withdrawal period is 14 days and starts on conclusion of the contract unless otherwise provided. It is counted under sections 187 and 188 BGB: the day of signature is not counted, and the period ends when its fourteenth day expires. Signing on a Tuesday leaves until the end of the Tuesday two weeks later.

For loans, section 356b(1) BGB pushes the start back. The period does not begin before the bank has made available to the customer a contract document intended for them, their written application, or a copy of either. If the customer only receives the documents a week after signing, the 14 days only start then.

For home loans, the second sentence of section 356b(2) BGB also checks the mandatory information on the right of withdrawal under Article 247 section 6(2) EGBGB. If it is missing, the period only begins once the bank supplies it under section 492(6) BGB. Under the third sentence, the period is then no longer 14 days but one month.

Even so, the right of withdrawal on a home loan is not open-ended. Under the fourth sentence of section 356b(2) BGB it lapses at the latest twelve months and 14 days after the contract is concluded. If the documents only arrived after signing, that later date counts. The cap applies even if the bank never supplied the missing information.

For the couple in the opening story: signature and handover on 2 March 2026. Under section 188(2) BGB the twelve months end when 2 March 2027 expires, and the further 14 days when 16 March 2027 expires. A withdrawal sent by then is in time; after that date the right has gone.

No withdrawal before a notary: the seven-day reflection period

Section 495(2) BGB removes the right of withdrawal in three groups of cases. For private individuals the most important is number 2: loan agreements that must be notarised, where the notary confirms that the customer's rights under sections 491a and 492 BGB have been respected. The notary's confirmation and a reflection period before signing take the place of later withdrawal.

Number 1 concerns arrangements that supplement or replace a loan in difficulty with repayment terms, where the bank could already terminate for arrears, court proceedings are avoided and the total amount is below the original outstanding balance. Number 3 refers to special overdraft cases under sections 504 and 505 BGB.

The statute does not leave the customer unprotected in these cases. For a home loan, section 495(3) BGB requires the bank to grant a reflection period of at least seven days before the contract is concluded. It starts when the contract offer is handed over, and while it runs the bank is bound by its offer.

The difference from withdrawal lies in the order of events. The withdrawal period runs after signature and lets the customer escape a concluded contract. The reflection period runs before it and is meant to stop the customer signing under time pressure. Booking the notary for the day after the offer arrives shortens a period the customer is entitled to.

What has to be repaid after a withdrawal

Withdrawal turns the contract into a relationship of mutual restitution. Under section 357b(1) BGB the benefits received must be returned within 30 days at the latest. Under section 355(3) BGB, this maximum period starts for the bank when the withdrawal reaches it, and for the customer as soon as they make the declaration.

If the loan has already been paid out, section 357b(3) BGB requires the customer to pay the agreed borrowing rate for the time between payout and repayment. On a home loan the customer may show that the value of the use they had was lower. If they succeed, only that lower amount is owed.

The bank may claim other costs only within narrow limits. Under section 357b(3) BGB the customer need only reimburse outlays the bank made to public bodies and cannot recover. The provision mentions no early repayment compensation, no processing fees and no lost profit.