Low repayment combined with regular special repayment

Hello dear forum community,

We are currently planning to take out a loan for building a house and are already in talks with Interhyp. In addition, we will obtain offers from a few other banks before making a decision.

By nature, I tend to be more cautious and am considering the possibility of keeping the fixed monthly burden manageable through a low repayment rate – let's say €1000 at 1% repayment instead of €1400 at 2% repayment with a free annual right to €20000 special repayment. To still not neglect the repayment, I would then transfer the €400 that I save every month to a separate account and at the end of the year use the saved €4800 as a special repayment (+ x€, which I can additionally invest because I was able to save even more).

What do you think of this repayment strategy? To me, this looks like security through low liabilities with the same repayment performance. And from the special repayment amount, there would still be €15200/year left for extraordinary special repayments – I rarely expect such a windfall that this amount would not be sufficient.

Thanks in advance for your assessments!

Basically a good idea to stay flexible. On the other hand, one must be clear that this flexible rate should always be paid and not fall into the temptation to spend the money on something else. If it is a matter of getting by during unemployment or similar situations, you can also arrange a rate change with the banks (often 2-3 changes can be made free of charge).

If you otherwise stick to it strictly and don't constantly come up with self-deceptions (new car, fancy vacation, new furniture, etc.), of course you can also choose your method.

Experience, however, often shows that significantly less is paid off as a special repayment than previously planned.

The idea is good. Experience shows (I come from the field of real estate financing) that hardly anyone actually makes special repayments (in the very low single-digit percentage range). Therefore, banks can also offer this option for free - it looks good in the offer. If you manage it, then it’s good. But usually there are many nice things that you still need (or simply want) and the special repayment amount goes towards that - especially in the first few years, when there are still many little things around the house. The garden, for example, is an expensive matter. It’s like a salary increase - somehow it always disappears into ongoing expenses. I personally find a higher repayment with the option to adjust the repayment rate if the money for repayment is no longer available in the long term, much more attractive. It’s basically a form of "forced saving".

Hello,

I can only agree with nordanney. Even if you save the money separately, it can still be "misappropriated."

I also don’t know which banks offer 1% repayment. Yes, they earn more when little is repaid. No, they do want repayments at that level.

For you, at least 15 years fixed interest period and at least 2% repayment apply. Everything else is nonsense.

Can only confirm nordanney and HilfeHilfe. Let yourself be disciplined by the credit agreement. Better to have an adjustment option for the repayment rate, just in case there are problems.

We do it basically the same way Foxxxi described, but with an initial repayment of 2% and a 5% special repayment option. I would never want to go below 2%. In the past, with an interest rate >6%, an initial repayment of 1% was certainly enough to be finished in 33 years. Today, for the same period, you need almost 2% initial repayment.