Building savings contract as interest rate protection or put the money into special repayment?

[....]
Sparkasse loan, 20 years fixed interest rate, 1.93%, €285,000, installment €933.38

[...] to conclude a building savings contract, which at that time will be approximately ready for allocation.
We have selected the following:

Minimum savings balance 30%, interest rate on balance 0.1%, fee 1.6%. Loan interest rate 1.80%, savings rate €264, term just under 9 months, repayment rate €528, term 10 years 9 months

[...]
The general question: Does securing with the building savings contract make sense? Or does it make more sense to put the money into special repayments? (But that is only possible with the Sparkasse loan). Are there better options or rather a better building savings contract? I look forward to answers.

Do I understand it correctly:
You want to invest the available liquidity at an interest rate of 0.1% with a fee of 1.6% and at the same time pay 1.93% interest on the amount not repaid? That means you are letting it cost you 3.43% (plus compound interest) to be able to pay the money back later?
Let’s say it’s about €1,000 you have left:
- Since you do not make special repayments with the €1,000, you pay 1.93% interest for 10 years, i.e. €210
- In addition, there is a 1.6% fee, i.e. another €16
- And you receive about €10 due to 0.1% interest on €984

That means after ten years you get back €994 from your balance and have paid €210 in interest. Effectively, you have turned your €1,000 into approximately €784. The problem with all building savings contracts is basically the base fee, which is far too high compared to the interest rate level and makes these contracts absurd today. When the interest rate level was 7%, 1% base fee was okay.

Building savers were therefore useful at high interest rates in the past. That customer advisors still recommend them in good conscience today is not even their fault. I deal with this professionally and was once able to admire training materials for customer advisors. They are designed so cleverly that even customer advisors end up believing that the contracts are good for the customers. Personally, I forbade my customer advisor from bringing up building savings contracts in the first minute, otherwise I would have looked for a new one immediately.

Best regards, Nika

P.S. The calculation above is just an estimate. 1.6% fee is quite bold. With a 1% fee it gets a bit better, but you are still negative.

P.P.S. Some with their own new building savings contracts will certainly not like this here. That's just how it is. We also concluded that a few years ago without much calculation. I booked it as a learning expense.

Hi, I can follow your calculation so far, but after 10 years I have to refinance the two KFW loans. In the event that the interest rates are then 5% because I did not secure them through a building savings contract, is it still not worthwhile to run a loss-making business during the accumulation phase?

Currently, there is no indication of rising interest rates. I wouldn’t do anything there now. From 5 years onward, you’re in the range of a [Forwarddarlehen]. You can still react then.

I would invest the money with moderate risk and at some point between the 7th and 9th year, when it appears favorable, withdraw it from the investment and leave it in fixed income.

Hello,

I don’t quite understand it yet:
After 10 years - when the fixed interest period for the KfW loans expires - you still have approx. €87,500 on these two loans. You want to repay them? I currently find the interest rate of the home savings loan too high for that.
In addition, your main loan from the Sparkasse will also still have about €145,000 outstanding at the end of the fixed interest period.

I think it is always sensible to reduce the most expensive loan. After 10 years and 6 months, you can also repay the loan free of charge, if the interest rate level is better then.

Maybe my loan calculator is a good way to play around a bit with the numbers. Just write to me.
It is written in Java, free of charge, without advertising, without data transmission - but still "beta".