KfW Funding Climate-Friendly Residential Building from March 2023

One more question in a slightly different direction:
With the KFW300 program, from a rational perspective, it is actually always smartest to opt for the 35-year term and the maximum 5-year grace period without repayment in order to keep the repayment of the cheap loan as low as possible over the 10-year fixed interest period, correct?
Always assuming, of course, that the money saved is put into the main loan or can be invested profitably.
Do you see it that way too or am I mistaken?

One more question in a slightly different direction: With the KFW300 program, it is basically always rational to choose the 35-year term and the maximum 5-year repayment-free start period in order to keep the repayment of the cheap loan as low as possible over the 10-year fixed interest period, correct? Always assuming, of course, that you either put the saved money into the main loan or invest it profitably. Do you see it the same way or do I have a flaw in my thinking?

I agree with investing profitably. However, if you put it into the other loan and after 10 years you switch at the KfW to 4 percent or 6 or 8, then the plan didn’t work out.

I agree with investing profitably. However, if you put it into the other loan and in 10 years you switch with KfW to 4 percent or 6 or 8, then the plan did not work out.

I think as long as I can invest the "saved money" or the lower rate at >0.53% (possibly considering taxes), this is always advantageous. But of course that means appropriate discipline and tracking, and after the 10 years have expired, you can reduce the loan amount in one go with the money during the follow-up financing. It doesn’t matter if the follow-up financing takes place at 1% or 7%. If I put it into the main loan (so to speak "invested" at 3.3%), it only makes sense if the follow-up financing is not > 4%, since then I no longer have the funds liquid. In that case, it might be worthwhile to keep the funds liquid rather than putting them directly into special repayments.

If I put it into the main loan (so to speak invested at 3.3%),

... you benefit enormously from the compound interest effect. But in the end, it is "only" a bet on the interest rates after 10 years. There is no right or wrong. Depending on your own assessment, one or the other option can be right. However, you will only find out after 10 years.

But in the end, it is "only" a bet on interest rates after 10 years. There is no right or wrong. Depending on your own assessment, one or the other option can be right. But you will only know after 10 years.

But that is exactly what I am trying to say. There is a right and a wrong. Setting the repayment for the KFW loan higher than the absolute minimum would almost always be wrong. One can then argue about the alternatives for the use of funds.

almost always

No. Not almost always. Just like you bet. But yes, I would do the same ;-)