I recommend a 5-year fixed interest period. That’s when the interest rates are lowest. During the first 5 years, you should make as many special repayments as possible and then you can refinance at 90% or even 80% loan-to-value, which saves a lot more interest. In 5 years, you’ll have saved tens of thousands of euros in interest, which is better spent on repaying the principal. Especially with 100% financing, which by the way we also did, the interest portion is a huge chunk at the beginning. You should keep that as low as possible, and that only works with high repayment rates and short fixed interest periods. After the first fixed interest period, you can then see whether to choose a longer term.
But then you have
- a better loan-to-value ratio after just 5 years – saves a lot!
- the option to use larger inflows directly for repayment and not only after 10 years – shortens the term!
- saved massive amounts of interest in the most expensive phase of the loan, since a 5-year fixed interest period compared to a 10-year one easily makes a difference of 0.5%.
To illustrate: with a €100,000 loan, 0.5% more or less interest means almost €50 per month!
To secure “low interest rates long-term” which then aren’t low anymore because long-term also means an interest premium, is above all: expensive.
Personally, I find more security in reducing the outstanding debt as quickly as possible than in knowing that my very high outstanding debt will at least be burdened with the same interest rates for 20 years. Interest rate increases are a manageable risk in today’s economy, unlike unemployment, divorce, illness, death, etc., where a long fixed interest period unfortunately doesn’t help.
And one more word about maternity protection: please don’t be too sure about that. Employers who want to get rid of a mother can do so. My ballet teacher, for example, was “talked out” after her first child by being transferred to a position (she has NO right to be re-employed in the same position!) that involved constant business trips – sometimes lasting weeks. She voluntarily quit. Also conceivable are positions with working hours late into the evening or transfers to other branches where commuting is long or even relocation would be necessary. Your sentence about maternity protection is unfortunately quite naive and unrealistic. It might be your wife is lucky with her employer, but if things go as described above – and all of that is legally correct – then I wouldn’t count on that income so firmly. The bank doesn’t factor it in at all.