How quickly should one pay off a house?

Hello,

we built a new house a few years ago. In the immediate vicinity or directly on the outskirts of a major city (400-800k; 15-20 minutes to the city center by car, bike, public transport every 10 minutes – at least a second car is theoretically completely optional and a luxury; all important daily necessities are within walking distance in multiple versions). At that time, we spent about 550k on pure construction costs plus about 50k for the stuff around it (kitchen, built-in wardrobes, other furniture, etc.). Currently, similar houses in the area go for about 900k; at the peak times about 2 years ago, it was rather around one million. We have about 600 sqm of land – plots of this size currently go for about 300k. In addition, we have about 180 sqm of living space (large living room, 4 bedrooms/children’s rooms/offices) plus 60 sqm of heated usable space (convertible to living space for about 20k euros). That means with the expansion we would have about 240 sqm of living space (but we don’t need that).

The building envelope & windows correspond to new build standards. It would have met KFW55 back then – but we did not certify it as such because market interest rates were absolutely comparable. The underfloor heating runs up to 32 degrees; a conversion to a heat pump is theoretically and regarding the necessary piping absolutely feasible. However, we currently have a gas boiler and no photovoltaic system (about 10 kWp would be possible southwest/southeast; 20 kWp with full roof). So there may still be costs here (although we expected to replace the gas boiler with a heat pump after 15-20 years anyway).

There are four of us; we (the parents) are both 36 years old. Net income together is about 6,500 euros plus 500 euros child benefit = 7,000 euros. From that, 240 euros go for childcare for both children in total, so net income including child benefit after childcare is about 6,750 euros (my wife works part-time, I work full-time with 38 hours at my company; + 60% remote work for me).

Current outstanding debt about 310,000 euros. We pay 1,300 euros rate per month. Outstanding debt in 2031: about 220,000 euros. Then the follow-up financing would be due. We have about 20,000 euros in an ETF portfolio and a bit of emergency fund in the bank. Otherwise no other assets; two very old but functional cars (total value both together 10,000 euros), no retirement provision other than the statutory pension (about 18 pension points per person so far; including crediting of pension points for children for my wife). Theoretically, we can save about 2,000 - 2,500 euros per month into the ETF portfolio. If no special expenses like vacation, new cars or other things come up. In the past, this was not always possible because my wife was on parental leave for quite a long time each time (i.e., longer phases with full salaries of 1.0).

My actual question: How quickly should you pay off a house? I more or less have the fixed idea that we will completely repay the loan by a one-time special repayment at the end of the term in 2031. That would be financially more or less feasible if we continue saving about 2,500 euros per month and, for example, continue driving our old but functional cars for the next 7 years. I am already worried that we practically have no retirement provision. Except for the house – clearly – but we want to live in it and there will probably be future costs like heat pump, photovoltaic system and wallbox. Possibly photovoltaic storage and surely at some point we will be forced to buy at least one e-car (25k+ for used ID3s, 30k+ for used ID4s), probably two. If for heat pump, photovoltaic system, photovoltaic storage, wallbox, 2 e-cars, etc. another 100k come together, that also has to be saved somehow.

And then I want to save an ETF portfolio for retirement. Our retirement provision is currently based solely on having a house (rent-free – but not cost-free – especially considering heat pump, photovoltaic system, photovoltaic storage, wallbox, e-cars, ...) and on the statutory pension insurance, where everyone tells us that when we are old, it won’t exist anymore.

On the other hand, I see that we are actually in a comfortable situation for our age (compared to many friends/acquaintances and if the statutory pension still exists when we are old). You could treat yourself to something, e.g. a new car now (used car of course!). On the other hand, I think again, why treat yourself to something if you are still in debt and still drive the old cars!?

Regardless of that, we actually do not restrict ourselves on vacation. I do not want to save there. It might also be about everyday topics, e.g. if I go for a drink with friends, I never treat myself to a taxi for 20-30 euros, but wait at 2 a.m. for the bus, which stops just 300 meters from the house. Although of course it would easily be possible to treat myself to a taxi home once (max twice) a month. Or with the bike, I ride a very inexpensive one, although I often ride by bike in everyday life...

Then I often read that some stretch the financing up to retirement or even into retirement. That would really be nothing for me. But should we stretch ourselves now and try to be finished in 7 years? Or refinance in 2031 again with unknown interest rates (maybe only repay 100k with a special repayment!?)?

"How quickly should you pay off a house?"
It's a similar question to "What color should a car be?"

Completely individual. There's no run-of-the-mill answer. But very few would say you have to be done by 43.

You have quite a bit of black-and-white thinking in your text. You're considering being done with the house financing by 43 because you see it as retirement security and don’t want the financing to extend into retirement.
But at 43, you are still far from retirement. Under normal circumstances, you still have 24 (!!) working years ahead of you.
So why this black-and-white thinking?
Just put as much as possible into (preferably the) ETFs now. And then see how the situation looks in 2031. If you really have 220k saved then, you don’t necessarily have to put everything into full repayment. Why not do a 100k follow-up financing? The conditions should be great at this loan-to-value period.

According to your statements, the 2500 euros monthly are only possible if no expenses like vacation are added. Further down you write that you don’t want to save on things like vacations.
Then you say that the second car is absolutely optional and rather a luxury item. But in the calculation with possible necessary expenses, a second electric car is then added. Again: Either keep driving both cars or buy two electric cars. Why so black-and-white?
And why do you assume that you will need a photovoltaic system with storage? I think you are by no means forced to have one. I have one myself, but you can perfectly well live without it.

By the way, I didn’t understand the construction costs either. 550k “pure construction costs” plus 50k for furniture etc.
Where is the land? Where are the outdoor facilities?

Somehow everything is a bit vague.

You are in a comfortable situation.

Keep saving the money .. maybe put some aside first to build up a comfortable savings account from which you can then, if you really need it, afford a "new used" car or a down payment for an electric car. The rest in ETFs.
And then see what the next 7 years bring. Maybe you still decide on photovoltaics and can finance it from these reserves, and when 2031 comes, you check the financing conditions then prevailing and decide how much of the saved amount goes into repaying the outstanding loan and which part you simply finance longer as a loan.

But should we now stretch ourselves and try to be finished in 7 years? Or then refinance again in 2031 at unknown interest rates (maybe only repay 100k early!?)?

Stretching is rather negative. On the other hand, you are proud to save on the taxi and other luxury items. Since I also do not understand the point of your post, I see the core statement or question here... you are probably currently facing a decision regarding a purchase?!

There are four of us, we (the parents) are both 36 years old.

Put money into consumption or comfort or continue to put so much into financing that you are done by 43... I too find the approach as well as the lifestyle very individual. And not only focused on the person related to the family, but also on the whole lifetime. Although I am very concerned with financial security, I will not live with the focus of allowing myself wishes "in old age." I think a 36-year-old also lacks this perspective. At 65+, I probably need the (expensive) e-bike, but also now at 56. And if a 35-year-old enjoys it, then he should buy it, provided the financial means make it possible. If frugality ends in deprivation, something is wrong. Your own property should be there to keep fixed costs low in retirement so that you can live more independently. In my opinion, you do not need to save twice. Why? You will probably no longer do the expensive crossing of the Alps later, just like expensive purchases that fall under consumption and make life more livable. You also have claims in old age, but no more than in the previous 30 years. That does not suddenly develop so that money might be missing then. Therefore, I am for the healthy middle ground: indulge yourself a little in time before it is too late. "Stretching," I did that until I was 30 to have some equity available. From then on, life and needs must take their course and not "work hard for later." For many, there will not even be a "later." I think it's great when someone can repay €10,000 at once, but honestly? €50,000 will also do. At that age, you do not have to repay early at all if everything is paid off by 60 according to the calculation. Live, and if it is only possible with financial means, then just live with these expenses. Life does not mean saving or deprivation. Stretching certainly not. As if retirement provision and saving are everything. No. Retirement provision is important, yes. But not at the expense of quality of life.

Live, and if it is only feasible with financial means, then simply live with these expenses. Living does not mean saving or renouncing. Certainly not stretching it. As if retirement provision and saving were everything. No. Retirement provision is important, yes. But not at the expense of quality of life.

Wow! One of the best posts on this topic in my eyes. Of course also because it exactly reflects my attitude towards life :D

This exact discussion I have with a very long-time friend of mine who is about my age. We both had children at the same time and bought a property. Our family incomes are similar. Since buying the property, he has been completely on the saving trip ("boah... I don’t know if I’ll pay for daughter 1’s next swimming course again. It costs 250 euros for 8 weeks!!"). He really turns every euro three times and gives up all sorts of things to be finished with the repayment as quickly as possible. I always wonder: now in his early 40s with two small kids, he wants to give up everything in order to have more at 60. For what? On top of that, he is a civil servant like me, and his pension isn’t the worst.

Don’t save life for later. Calculate wisely so you don’t get into money troubles later. But working life doesn’t end at 50.

Wow! One of the best posts on the topic in my eyes.

Thank you. Although the insight has actually grown more due to age.

at my age.

May I ask?

Really turns every euro three times and gives up all kinds of things to get through with repayment as quickly as possible.

Yes, that's me somehow too. But somehow both works, special repayments and consumption. My husband had his company pension paid out. Six-figure value. When you suffer from 2-3 widespread diseases, you know the priorities. Both of us find it difficult in our minds to spend money, and this does not mean taxis or a better carport. But it’s about expensive trips, motorhome, expensive dog, etc., so for us about the added value of life. But it works wonderfully for us now (setting priorities), but it is also individual. If you only focus on frugality, then you should find out a bit about your life.