Tilgung is the principal repayment portion of your mortgage — the part of each payment that actually reduces the loan, usually expressed as the percentage of the original loan repaid in year one.
The Trade-Off
Common Tilgung rates run from one to three percent, with some products allowing more. A higher Tilgung shrinks the balance faster and leaves a smaller Restschuld when the Zinsbindung ends — in exchange for a higher monthly payment. A lower Tilgung leaves more cash in hand each month but more debt to refinance later.
How It Interacts With Cashflow
- Higher Tilgung trades current cashflow for faster equity build-up
- Lower Tilgung improves monthly cashflow but raises refinancing risk
- Most German loans allow extra repayments (Sondertilgung), often up to 5% of the loan per year