Prepayment Penalty for Loans vs. Current Interest Earnings

Shares are not a reasonable substitute for [Sonder-Tilgungen].

We actually wanted to make extra repayments to have our €200,000 loan paid off in 10 years.

Interest rate 0.67 (Dec21/Jan22)
(you have to be really lucky sometimes)
Installment €1037
Fixed interest period 10 years
With a €10,000 extra repayment, we would have finished early.

We do not make any extra repayments at all, after 10 years we still have an outstanding balance of €84,000.

Biallo is now calculating for me that with a monthly savings rate of €630 and 2.066% interest per year, I will have saved €84,000 in 10 years and can pay off the loan.
This savings rate and the paid loan installments add up to €200,000.
It’s a bit putting the cart before the horse, but if I can put aside €630 monthly at 2.066% somewhere, then the loan costs me €0. (apart from the interest on the already drawn part of the loan and possibly the commitment fees)
The 2.066% is currently available quite risk-free with [Tagesgeld].

So at the moment, probably no extra repayment after all.
Or do I have a knot in my head?

So at the moment probably no special repayment after all. Or do I have a knot in my head?

[/QUOTE] yes, as soon as the risk-free investment (fixed deposit, short-term government bonds) yields more interest than the loan costs, no special repayment. Everything else is mental accounting. I am even of the opinion that up to 3% loan interest over 15-20 years a special repayment does not make sense and one should invest the money in ETFs. I would also be significantly happier with 300,000.-- debt and 80-120,000.-- invested money than with 200,000.-- debt and no further assets

I advocate in such situations not to consider only the loan. 84k outstanding debt in 2031 is nothing to be afraid of. Therefore, the question is how the retirement provision looks.

Always interesting what complicated calculations are made when a simple comparison is enough. So again: Saving instead of repaying is worthwhile if:

Savings interest * 0.75 > Loan interest

The factor 0.75 is for the deduction with capital gains tax. (Allowance and church tax neglected)

My bank has now granted me an interest rate of 2.05% for an investment period of 3 months. We have temporarily parked our equity (115k) there, which we will only need for furniture, kitchen, and outdoor facilities in autumn.

I find the situation currently very favorable for everyone who has financed cheaply - that is, with low interest rates - regarding the alternative option for debt reduction.

Someone already said it aptly: if you cleverly shuffle extra money between secure investment forms, ideally in the end, the mortgage loan costs you nothing.

Anyone who has financed €300,000 at 1.0% would essentially have to invest €100,000 at 3%, and you have practically reached the break-even point (simplified calculation without considering time and taxes).

Currently, interest rates for annuity loans are rising further, and investment rates are also gradually getting better if you observe it that way. So for investors in secure forms, the best of times.