Financing the purchase of a single-family home: Lower interest rate or longer term?

What helped me back then to get a bit clearer was to calculate the total costs for different scenarios. That’s how I came up with my "about 3.8%". I made an Excel sheet for myself and a tab for each financing option (15 vs. 20 years, I think I even had a version with a [Bausparer] over 30). Then you calculate how much interest (in euros, not percentages) you have paid cumulatively until your fixed interest period ends. For simplicity, I always calculated without special repayments. Then I came up with different hypothetical follow-up interest rates (1.5%, 2%, etc.), and calculated how much interest I would pay at a constant rate until the remaining debt is paid off. Then you always get values for when you will be debt-free and what additional interest will accrue. For these calculations that you can enter into Excel, there are good interest calculators on the internet. (Or you write it yourself in Excel, but the ones online are easier). In the end, I always calculated what total costs (interest costs + potential [Bausparer] fees or similar) I would have for the loan if it is fixed for X years and then I have to continue repaying at interest rate X until I am debt-free. And then you can compare what it really costs, all in, until you are debt-free. You quickly notice that an interest rate surcharge of 0.25% makes a significant difference in costs.

The remaining debt after 20 years should be around 87k, I would double-check that.

If after 15 years just under 4% is reinvested for another 5 years (so a massive interest rate increase) with the same rate of 1616€, you would end up with the same remaining debt (87k) after 20 years with a slightly higher rate than with the 20 years directly, the difference in the rate is around 1k€ per year. The remaining debt is certainly not a problem in both cases (loan-to-value potentially well below 25%), but so that you have a "break-even," the rest is gut feeling.

The outstanding debt after 20 years should be around 87k, I would double-check that.

Yes, and the numbers for the 15-year term don't add up either! "Great" offer. :cool: Maybe the interest rate is actually higher, which is why the outstanding debt is higher as well.

Hello everyone,

great, many thanks for the many contributions here! It definitely got the minds at home working hard and Excel heating up.

On the topic "The numbers don't add up":
That's true, I noticed that too. It seems to be because I fix the interest rate as of today, but the drawdown and repayment of the loan will only start in 9 months.
If you assume a repayment period of "14 years and 3 months" for the 15-year fixed interest rate, then you end up with the numbers mentioned at the beginning.
But I agree with you: it is definitely "strange". And just because I can follow it, doesn’t mean I understand it.
I have to ask the advisor again because it doesn’t seem to fit that way.
Does anyone have an idea?
The interest-free construction period would be 12 months according to the offer.

I have an appointment with a broker on Monday; let’s see what he advises me.

One thing I was able to deduce already: At a hypothetical 6% interest rate, we can also afford the "high" residual debt of the 15-year variant.
Thanks so far to all of you, I’ll keep you updated!!
Great forum, constructive contributions!

If you assume a repayment period of "14 years and 3 months" for the 15-year fixed interest rate, then you end up with the numbers mentioned at the beginning. But I agree with you: "Strange" is definitely what it is.

That's not strange at all, but exactly what you want. I think it's very exemplary that the repayment plan takes this into account accordingly. Just imagine it the other way around: You are lured with a low remaining debt, but due to the 9 months, you miss out on a few thousand in repayment at the end.

We also had a first meeting with an intermediary this week. On the topic of low interest rates versus longer terms, he had an interesting thesis. He clearly advised a shorter term with the following reasoning: If the interest rate is much higher than today in 10+ years, banks would not be able to afford the low fixed interest rate anyway. Similar to the issue with [Bauspareren], where [Bausparkassen] canceled old contracts because they could no longer pay the old attractive interest rates and the customer ultimately, despite valid contracts, ended up at a disadvantage. What do you think of this thesis? The basis for such decisions is already the assumption to adhere to law and contracts, but he does have a point somewhere... probably not at an interest rate of +0.5 but maybe at +5, 6, 7,...