Financing with low repayment and many special repayments

We wanted to go with the same model, 2% repayment and 1.68% interest. The same in green, only repayment and interest swapped. This would have been a nice comfortable installment.

But the bank said "not with us" if you want that interest rate, you have to go to 3% repayment. I accepted it also considering that the term was shortened by 9 years.

Much more important is that you do not take one loan agreement (e.g. €350k loan), but split it. For example, if a tranche of €100k is repaid through special repayment after 7 years, you are free to decide whether the burden should remain the same, i.e. repayment goes up, or the burden is e.g. €360 lower due to the eliminated installment.

Since we have an existing property, the situation is obviously different, but by now we haven't made any special repayments for 2 years, as we would rather do some work here and there on the house. We were still satisfied with the special repayments during the first 1.5 years. In the coming years, a new bathroom is planned. That roughly means 3-4 special repayments if you cannot raise the money on the side.

The financing should be structured so that the house is paid off by the time the income decreases (i.e., at the start of retirement).

We have a partial component where this is not the case. This involves [Landesmittel] from a housing promotion program. There was no other way. However, the remaining burden of then 250 euros is not painful, even with a pension.

I would aim for a minimum repayment rate of at least 2%, preferably 2.5-3%. More is always better, but you have to be able to afford it first.

especially since one gets used to the monthly burden

It’s all a matter of personal preference, and we are the best example that a low rate + special repayments can also work.

When saving up for the house, we didn’t choose a fixed rate, but with the exception of a base amount, we simply put everything left over each month into a daily allowance account. If a larger bill was due, something was sometimes transferred back if necessary. We just prefer to think three times over bigger expenses whether the purchase is really necessary or not.

That’s why it was clear to us that we could also work with special repayments.
We also chose a low monthly rate for ourselves, which would have worked in most scenarios (unemployment/disability, etc.). This resulted in a 2% initial repayment rate. The rest was supposed to take place through special repayments.

Since the salary situation improved significantly compared to the original plan, we were able to use the entire special repayment option at the beginning of the year every year. In this respect, we are even saving interest compared to a high monthly rate.

Perhaps our decision at the time on setting the rate amount would have looked a little different if a repayment rate change had been possible.

But I would also doubt whether it is really necessary to go for a 1% initial repayment rate at the current interest rate level.

In my opinion, that is exactly the difference. With 2%, you have already chosen a repayment rate where you can sleep easy for a year or two, even if there are no special repayments. In addition, few people make their special repayment at the beginning of the year; most do so at the end of the year, where I would not initially consider the interest disadvantage to be decisive.
With €400,000, 1% repayment + 2% interest equals €1,000 per month. If you want to reach 3% repayment, you have to repay nearly €700 more per month, or €8,000 more per year. Personally, I wouldn’t trust myself to do that. But as mentioned, it’s a matter of personality.
Moreover, this also forces me a bit to pay the rate (just over 3% for us) for as long as possible and to cut back a little privately if an additional child or unemployment occurs. If I made many special repayments, the temptation to slack off sometimes would be greater.
However, we also have the option to reduce our repayment to about 1.7% if necessary. In addition, for absolute emergencies, we have our parents, who could support us for 1-2 years without having to restrict themselves, if things get really tough. I sincerely hope that will never be necessary, but it is of course reassuring to be pretty sure never to lose your house (at least not to the bank).

Two things would be fundamentally important to me:
1. Fully paid off by retirement (and if possible, not exactly at the 67th birthday cutoff)
2. More repayment than interest → means about 2% repayment in today’s times.

How you get there is up to each individual; for me, I would just set up a system to ensure that. If in one year I have repaid less than required and could not compensate through previous years, then I need a plan on how to catch up in the following years.