Prepayment Penalty for Loans vs. Current Interest Earnings

No one can predict that. But here are a few thoughts as bullet points: - China is an important sales market for Western industry - Chinese cars could displace Western cars in third countries. Not just cars, products in general - Internet services like the classic Facebook can be quickly displaced, see the success of Tik Tok - China is competing worldwide for the use of raw materials - China, India, etc. benefit from the Russian energy boycott

So a lot can happen that can quickly harm our Western economy in the MSCI World directly or indirectly. If China benefits from it, it is not included in the ETFs, they will only decline.

This is written very pessimistically and does not have to happen.

it hasn't particularly harmed the MSCI World so far, so why in the future?!

Because the world is changing. China is growing and gaining influence. Some things may be a house of cards, like their real estate bubble, but other parts of the economy should be taken seriously.

No one can predict that. But here are a few thoughts as bullet points:
- China is an important sales market for Western industry
- Chinese cars could displace Western cars in third countries. Not just cars, products in general
- Internet services like classic Facebook can be quickly displaced, see the success of TikTok
- China competes worldwide for the use of raw materials
- China, India, etc. benefit from the Russian energy boycott

So a lot can happen that can quickly harm our Western economy in the MSCI World directly or indirectly. If China benefits from it, ETFs won't include that, they will just decline.

This is written very pessimistically and may not happen that way.

Because the world is changing. China is growing and gaining influence. Some things may be a house of cards, like their real estate bubble, but other parts of the economy should be taken seriously.

Yes, maybe, but honestly, I can't really imagine that. Still, I have a small part of my money in a Chinese ETF, as a little hedge ;-) You don't have to put everything on one horse. So far, however, it has been very moderately successful, if you can even call it successful at all. :-)

How about reducing the repayment, paying the amount left over monthly into an MSCI World ETF, and investing the special repayments annually in fixed-term deposits that run one year shorter each time and become fully available when the loan matures? That’s my plan, but I need to see if the bank agrees to reduce the repayment. I’m financing at 0.9% for 10 years. Oh, the original poster’s question was actually different.

How about reducing the repayment, investing the amount that is left over monthly in an MSCI World ETF, and placing the special repayments annually in fixed-term deposits that always run one year shorter and are completely free upon the maturity of the loan? That is what I plan to do, but I have to see if the bank agrees to reduce the repayment. I am financing at 0.9% for 10 years. Oh, the question of the OP was actually different.

You haven't missed the intention of my question that badly. Anyone who has agreed on a flexible repayment would indeed do well to set aside the difference from the repayment reduction and invest it as a fixed-term deposit. Unfortunately, I have no possibility to change my repayment because it is fixed. And I also believe that no bank would do that voluntarily at the moment, as it increases the risk they bear. However, I would not put the money into an ETF, because your annuity payment is 100% due, but the ETF is not. I would cover secure liabilities only with secure investments. What you do on top of that is another matter, but if you invest money from a repayment reduction elsewhere, then only in equally secure investments – at least that is my opinion. Otherwise, in the worst case, it will be a losing business.

How about reducing the repayment, investing the amount left monthly in an MSCI World ETF, and placing the special repayments annually in fixed-term deposits that always run one year shorter and are fully available when the loan matures? That's what I plan to do, but I have to see if the bank agrees to reduce the repayment. I finance at 0.9% for 10 years. Oh, the original poster’s question was actually different.

Would you have sold shares of the MSCI World ETF to have more equity for the house? If yes, don’t. If no, feel free.

Repayment replacement products are not exactly new, but you can get badly burned if the yield of the replacement product is not where you hoped it would be, e.g., at the end of the fixed interest period. This happened repeatedly in the 90s to builders who preferred to fund a capital life insurance policy rather than repay. In the example of stocks (ETFs), it is really questionable whether an investment horizon of less than 10 years is even suitable for this. The problem is that stocks fall into risk class 3/4, while special repayments or fixed-term deposits are risk class 1. More risk means more chance, but how painful would it be if your ETFs are on a downward trajectory at the end of the fixed interest period and the follow-up financing becomes significantly more expensive, while the remaining debt has stayed quite high?

Ultimately, the question depends on the remaining debt. Those who, through lower repayment, have a remaining debt of 100k in 2030 instead of 60k, can also reduce the repayment and invest in the stock market instead. However, those who turn a 250k follow-up financing into a 350k follow-up financing should perhaps not do that.