Alongside market value, the mortgage lending value is the second central value concept in German real estate practice. It determines the extent to which a property is recognised as loan collateral – and thus governs the loan-to-value ratio, financing terms, and the eligibility of a loan for Pfandbrief cover. It is not determined in accordance with the ImmoWertV, but under a separate, deliberately conservative set of rules: the Mortgage Lending Value Regulation (Beleihungswertermittlungsverordnung, BelWertV) on the basis of the Pfandbrief Act (Pfandbriefgesetz, PfandBG).

Since 1 January 2025, the mortgage lending value has gained even greater significance: CRR III introduced the “property value” as the sole valuation standard for the preferential capital treatment of loans secured by mortgage liens – and the mortgage lending value determined under the BelWertV fully meets these requirements. A BelWertV-compliant appraisal report is therefore no longer a topic relevant only to Pfandbrief banks. This article explains the legal basis, methodology, and current parameters – as of July 2026.

Clarification of terms first: The Market value (market value) pursuant to § 194 BauGB (German Building Code) is a value as of a specific date – it reflects the price that could be achieved on the valuation date in the ordinary course of business. The Mortgage lending value mortgage lending value, by contrast, is a value over a period of time: the value that, independent of temporary market fluctuations, for example those caused by economic cycles, and without speculative elements, could presumably be achieved on a sale throughout the entire term of the loan (§ 3 BelWertV). It may never exceed the market value and in practice is regularly noticeably lower – not as a flat-rate deduction, but as the result of an independent, conservative methodology.

Legal basis: § 16 PfandBG and the BelWertV

The starting point is § 16 PfandBG. Paragraph 1 requires that the valuation be carried out by a valuer who is independent of the lending decision. Paragraph 2 sets the substantive standard: the mortgage lending value may not exceed the value resulting from a prudent assessment of the future marketability of the property, taking into account its long-term, sustainable characteristics, normal regional market conditions, and its current and possible alternative uses. A transparent market value determined using a recognised method also constitutes the absolute upper limit.

The details are governed by the regulation issued on the basis of § 16 para. 4 PfandBG, the BelWertV. It has been in force since 1 August 2006 and was comprehensively revised with effect from 8 October 2022 – with noticeable consequences for capitalisation rates, the small-loan threshold, and inspection requirements (discussed below). For Pfandbrief cover purposes, § 14 PfandBGadditionally applies: only loan portions up to 60 percent of the mortgage lending value may be included in the cover pool – the so-called lending limit. Financing above this limit is possible, but cannot be refinanced through mortgage Pfandbriefe.

The methodology: the two-pillar principle of the BelWertV

The core of the BelWertV is the two-pillar principle under § 4: the income value and the cost value must be determined separately from one another. For income-producing properties, the income value is decisive, while the cost value serves as a control check. If the income value exceeds the cost value by more than 20 percent, the sustainable letability must be examined particularly closely, and the mortgage lending value must generally be reduced by a deduction. For properties under construction, the completed mortgage lending value is replaced by the condition value – the land value plus the proportional value of the structural improvements according to the state of construction (§ 4 para. 6 BelWertV).

Income approach

The basis applied is not the current peak rent, but the sustainably achievable gross income. Operating costs of at least 15 percent of gross income (management, maintenance, rent default risk) must be deducted from this; since the 2022 amendment, modernisation risk and non-recoverable operating costs must additionally be taken into account beyond this minimum rate. The capitalisation rate must be derived from regional, use-specific, and long-term market development (§ 12 para. 3 BelWertV) – but must be at least equal to the minimum capitalisation rates published by BaFin.

Minimum capitalisation rates (as of July 2026): 5.5% for residential use and 6.5% for commercial use – unchanged since 1 January 2024 and not adjusted as of 1 January 2026 either, as the upper limit of the permissible corridor has been reached. Since the 2022 amendment, the minimum rates have been derived dynamically (§ 12 para. 4 BelWertV): the yield on 30-year German government bonds plus 3 percentage points (residential) or 4 percentage points (commercial), capped at corridors of 3.5–5.5% and 4.5–6.5% respectively. BaFin reviews the rates annually as of 30 November. Additional use-specific surcharges apply under Annex 3; for prime properties, a deduction of 0.5 percentage points is possible (§ 12 para. 5 BelWertV).

Cost approach

The cost value comprises the land value and the value of the structural improvements. In addition to depreciation for age, a safety deduction of at least 10 percent must be applied to the production cost of the structural improvements (§ 16 para. 2 BelWertV); ancillary construction costs and external site improvements are only eligible to a limited extent. The result is therefore systematically lower than a cost value determined under the ImmoWertV.

Sales comparison approach and statistical methods

The sales comparison approach is only permissible for single-family and two-family houses as well as condominiums (§ 19 BelWertV), likewise subject to a safety deduction of at least 10 percent from the determined comparison value. New since the 2022 amendment: for these property types, it is now also possible for the first time to use statistical, computer-assisted valuation methods – an important step for the digitalisation of private residential property financing.

Requirements for valuers and appraisal reports

The BelWertV sets high requirements for the person of the valuer. Under Section 6 BelWertV they must possess specialised knowledge and many years of experience in real estate valuation; for valuers appointed by state or state-recognised bodies, or certified in accordance with DIN EN ISO/IEC 17024, this qualification is presumed. Section 7 BelWertV requires independence: no involvement in loan acquisition or credit decisions, no proximity to the marketing, sale or letting of the property, and no personal interest in the outcome of the appraisal report.

The appraisal report itself must, in accordance with Section 5 BelWertV comprehensibly set out all value-determining circumstances – legal and factual conditions, the quality of the property and its location, the regional market, and in particular lettability and third-party usability of the property. As a rule, both an interior and exterior inspection is required; since the 2022 amendment, video inspections have been permanently permitted, though only where the remaining useful life is at least 40 years and subject to a value discount of at least 5 percent. For smaller financings, the small loan threshold under Section 24 BelWertVapplies: up to a secured amount of EUR 600,000 including prior charges (previously EUR 400,000), a full appraisal report may be dispensed with for residentially used properties in favour of a simplified valuation – provided that any commercial income share does not exceed one third of gross income.

CRR III and the Property Value: new relevance since 2025

With CRR III (Regulation (EU) 2024/1623), the final Basel III implementation entered into force on 1 January 2025. Central to real estate valuation: Art. 229(1) CRR introduces the "Property Value" as the sole value concept for the capital privilege applicable to loans secured by mortgage, replacing the previous option to choose between market value and mortgage lending value. The concept has applied to new business since 1 January 2025, and the existing loan portfolio is to be converted to the new value standard by the end of 2027.

The Property Value is deliberately conservative: it may not exceed the market value, must exclude expectations of future price increases, and must remain sustainable over the term of the loan; for revaluations, an average-value cap also applies over six years (residential properties) or eight years (commercial properties). What matters most for German practice: The mortgage lending value under Section 16(2) PfandBG in conjunction with the BelWertV satisfies the requirements of Art. 229(1) CRR in every case. Anyone instead starting from the market value must ensure conservative adjustments – in practice, through discounts whose derivation must reflect long-term market conditions. For Pfandbrief cover itself, the well-established mortgage lending value under the PfandBG continues to apply.

The consequence is already visible in the market: BelWertV-compliant appraisal reports are increasingly in demand even among institutions that do not issue Pfandbriefe – savings banks, cooperative banks and specialist lenders – because they represent the regulatorily safest route to the Property Value and thus to reduced risk weightings under Art. 125 and 126 CRR.

When is a mortgage lending value report required?

Typical valuation occasions include:

  • Real estate financing above the small loan threshold – from multi-family residential buildings to commercial and operator properties
  • Inclusion of loans in cover pools for mortgage Pfandbriefe (Sections 14, 16 PfandBG)
  • Capital privilege under Art. 125 and 126 CRR – the mortgage lending value as a recognised Property Value
  • Monitoring and revaluation of the existing loan portfolio (Section 26 BelWertV, Art. 208(3) CRR), for example in the event of significant market changes or payment defaults
  • Additional lending, extension and refinancing, as well as release of collateral and collateral substitution
  • Acquisition financing for institutional investors – often as a combined market value and mortgage lending value report in a single document

How to recognise a BelWertV-compliant appraisal report:

  • Separate determination of income value and cost value (two-pillar principle) rather than a single approach
  • Use of sustainable income rather than current market peaks – with documented operating costs of at least 15 percent
  • Compliance with the current BaFin minimum capitalisation interest rates, including the surcharges under Annex 3
  • Disclosed safety discounts – at least 10 percent in both the cost approach and the sales comparison approach
  • Robust findings on lettability, third-party usability and remaining useful life
  • Documented interior and exterior inspection, together with details of the valuer's qualification and independence

Conclusion

The mortgage lending value is deliberately not a market value – it is the conservative anchor of real estate financing, one that holds up even in weak market phases. It is precisely this stability that has made it, with CRR III, a regulatory reference value extending well beyond the Pfandbrief business. The decisive factor for recognition is the quality of the appraisal report: methodologically sound in accordance with the BelWertV, with comprehensible parameters, prepared by a valuer who can demonstrate both qualification and independence.

The real estate valuation firm STRECKEL prepares mortgage lending value reports in accordance with the BelWertV, as well as combined market value and mortgage lending value reports – for banks, institutional investors and private clients. Book a no-obligation consultation now.

 

As of: July 2026. All regulatory information – in particular the minimum capitalisation interest rates – was verified at the time of publication; the current announcements issued by BaFin at any given time shall prevail.