Fully financed property or pay in full

Hello everyone,

I am in the special position to pay for our single-family house (~500k) completely myself without having to finance it. I already own the land. (480k market value according to current calculation)

This leads to the fact that the bank offering me feels like outrageous interest rates (0.54% / fixed for 10 years including free special repayment of 10% p.a. if desired).

Isn't it silly not to take the money from the bank?

What am I overlooking there?

Isn't it stupid not to take the money from the bank?

Do you have alternative (secure) investment options?

What am I overlooking there?

Nothing

I would finance and invest the equity in several rental apartments. Leveraged through high debt.
Of course, you need to have the monthly liquidity for the property financing.

Why on earth use equity for the rental properties when the financing costs are tax-deductible? I can think of better things to do. However, with 0.5% interest for the home, I would also finance it and look for alternatives.

Use equity for the rental properties,

Only as much as necessary to get the apartment financed.

Financing and investing money.

Simple calculation. If your (secure) investment yields more than 0.54% after taxes, then finance. However, in Germany it is psychologically very common to sleep more peacefully without debt.

I checked, Volkswagen Bank savings bond yields 1.35% & you have very high deposit protection. That means about 0.6% return per year = 3k = small Tyrol vacation per year