Finance construction project, total costs: €395,000

Your post makes me grin, as I did liquidate my six-figure equity in the form of stocks when it became foreseeable that this money would be needed for a house. But go ahead. The day after tomorrow there will be a new theory anyway. Let me know when something comes through in practice.

In the end, you secure your property with a value that has a significantly higher default risk. That is stupid. Simply stupid. If you happen to have a million on the side to cope with that in case of emergency, go ahead. Ask the builders of the 90s who secured their property with a life insurance policy instead of repaying directly. Unfortunately, returns never materialized...

Well. At least I had a hearty laugh

But I said, this is something for financially savvy people. Don't be offended, but apparently you do need a deeper understanding here of how, for example, (large) companies operate economically and what individuals usually get wrong in principle.

I manage finances for a large company, even a very large one, and I would not recommend any individual to manage finances this way, since goals, capital amount, securities, and accounting possibilities fundamentally differ.

Securing the residual debt of a mortgage loan with a risky investment instead of repayment is economic suicide—especially when considering the expected value.

You can only do this if you have multiple times the investment—like a large company—in other investment forms and consider financing through the capital market only for profit reasons and not for liquidity reasons.

77.willo is completely right. Under no circumstances should the remaining debt be secured with stocks. That is not the point. And the investments (!) in the capital market instead of repayment are made only for return reasons and not to dissolve everything again in the end and repay the remaining debt. That is only a theoretical possibility.

It is about the fact that sooner or later
a) the loan must be paid off
b) a significant amount of equity is needed
because surely we all want to retire at some point.

Our generation (Alex85 = born 1985?) will not be able to retire before the age of 70 through the state pension (those born in 1964 retire at 67, after that the increase per year of birth will probably be closer to 3 months instead of 2 months; mathematically, someone born in 1985 would retire at 72 years and 3 months). If it is only about having the property paid off by then, okay. Then pay off a lot and fine.

I now assume that one wants to retire before their 70th birthday. You can either put everything max into repayment first and get 1.1% return for it and then turn to the capital market in 15-20 years and earn on average 6-11% OR you pay off (return 1.1%) a bit and save some in the capital market (return e.g. 8%) and enjoy compound interest much earlier.

For sure, all this has nothing to do with it. I assume most can easily handle an annuity of 6,7,8,9% in 10 or 15 years. But it is about needing more than just a paid-off property and that it makes no sense to pay off the property as quickly as possible while neglecting REAL retirement planning.

A popular recommendation is 100 minus age equals stock share. If I am 30 years old and put 875 EUR into repayment (interest is not to be considered, it is no investment), then I should also put 2,041 EUR into stocks. Hardly anyone manages that alone, and most will probably end up with 80-100% fixed deposit share (i.e. repayment).

Please, please mentally separate the property and the financing. At the moment I bought/built the property, it is 100% on the asset side of my mental balance sheet. I participate 100% in value gains and value losses. On the mental liability side is a loan, which, except from a legal perspective, has nothing to do with the property on the asset side.

If I have 80% financing, I am still 100% economic owner of the property and not 20%. The bank does not participate in value gains but gets all its money back even in case of value losses (except total loss).

2-3% fixed deposit over 10 years

As of today, 1.8% is the best offer for a fixed deposit over 10 years. (Source Test.de, now you will say that they have no idea ...)

turn to the capital market and achieve an average of 6-11% there

Pure fantasy numbers.