Repay savings or save? + Secure interest rate

For someone who wants interest rate security, it can sometimes make sense to secure part or all of the outstanding balance using a [Bausparer]. However, all costs must be compared here and one must be able to live with potentially paying more overall. But: If you want to save flexibly, the [Bausparvertrag] is not the right choice for you, for the reasons mentioned by [Musketier]. In that case, it is indeed better to make special repayments.

That can go seriously wrong. Even if you have reached the minimum savings rate, it does not necessarily mean that the building savings contract is eligible for allocation. For allocation, the valuation number must have reached a corresponding value. By shifting the payments, it can happen that this valuation number is not yet high enough. Then you have your money tied up in the building saver, but you cannot use it yet. You have to understand the building savings construct.

You are right about the point regarding the valuation number.

Here is an example: A monthly savings rate of 400.00 EUR has been agreed for the redemption building savings contract. However, I have to accept a loss of income in 2 years, for example due to parental leave, so I reduce the savings rate to 100.00 EUR per month for 12 months. This means that a total of 3,600.00 EUR (12 x 300.00 EUR) is missing. Then it is not enough for a sufficiently high valuation number and thus timely allocation to simply "make up" the amount later by a lump sum payment or by increasing the originally agreed savings rate of 400.00 EUR. Because the building society has then "worked" with the money for a shorter time, the valuation number required for allocation will probably not be reached.

You can compare this somewhat to a private pension insurance (please don’t stone me, it’s just a rough analogy ;-)). It is always better to start contributions at a young age (i.e., earlier) than to start later in life (ignoring age-related deductions/surcharges + other costs). Here too, the money can "work" longer with the former variant and thus reach the goal faster (= analogous to timely allocation of the building savings contract).

But, to come back to the building savings contract: With the building savings contract, I am so flexible with the installments that I do not have to apply for a repayment change at the bank first or save the minimum contribution of the special repayment (often at least 1 or 2 thousand EUR p.a.) in order to use it once a year.

I do not want to deny the annuity loan with special repayment option variant this flexibility either. It is actually a matter of faith which variant one chooses. Of course, it is correct that both variants must be understood precisely in order to make a decision. For me, the advantage of the building savings contract variant clearly outweighs the ABSOLUTE planning security from the beginning to the end of the financing (of course only if the building savings amount exactly matches the residual debt of the annuity loan at the end of the fixed interest period). And still, you are absolutely flexible. As with all constructs with special payments (e.g., how you structured your financing with the special repayment), payment discipline is required anyway.

Another argument in favor of a building savings contract is that an unused special repayment is "lost" for one year and thus cannot be carried forward to the following years.

For someone who wants interest rate security, it can sometimes make sense to secure part or all of the remaining debt using a building savings contract. However, all costs must be compared here, and in case of doubt, one must also be able to live with paying more overall.

Currently, almost every building society offers cost-transparent building savings contracts --> e.g. only an initial fee but otherwise completely free of costs (account fee, loan fee, etc.).

But: For those who want to save flexibly, the building savings contract is not the right choice, for the reasons mentioned by Musketier. In that case, it is actually better to make special repayments.

And that is exactly not true for the reasons I mentioned in my last post. The flexibility is always higher with the building savings contract variant. The variant without the building savings contract can of course be cheaper in terms of total costs.

Cost certainty is higher when you have a longer fixed interest period. If you only have 10 years, you have to take the interest rate that is currently on the market or the one the bank gives you.

With a longer fixed period, you are flexible from the tenth year onward and can decide whether to continue paying or to refinance.

Otherwise, after 10 years, you would have a huge remaining debt. Regardless of whether you have a [Bausparvertrag] or not. The amount is much higher if you have a [Bausparvertrag]. And the lower the remaining debt, the better conditions you get again from the bank.

: I don’t want to speak badly about the building savings contract. We also have one that might pay off part of the remaining debt after the interest rate lock expires, but it already existed before the financing. It still provides us with additional security. Whether we then have to restructure the remainder at 4, 5, 6, or 7% can be pretty much irrelevant to us. It might annoy us at worst, but it won’t drive us into ruin.

Temporarily lowering the rate of the building savings contract for a manageable period will certainly be possible if it is ensured that the allocation maturity is reached at the appropriate time. But flexible saving with the motto: "This month I will put in this much and next month nothing because of this or that expense..." can quickly backfire. And in such a case, I would prefer to keep the money for myself and, if I want and can, use it for special repayments.
By the way: Our financing bank does not have a minimum special repayment requirement. I don’t know how it is with other banks.

Accordingly, the conclusion is as always:
It always depends on the individual’s risk tolerance or need for security, of course depending on the financial situation.
What is good for one person doesn’t necessarily have to make sense for another.

In this spirit... :-)

Hello,

Something else was simply not possible in the big city without money.

That is simply not true. When you were a child, there were holiday programs for very little money through Caritas, the Red Cross, or ASB, and also quite a few cities/municipalities and communities that offered holiday activities for children who stayed at home.

This has mainly affected my current life in that I absolutely dislike going anywhere (and then having to pay for it?). For that, however, I place the utmost importance on my everyday life and my home being perfectly tailored to my needs. In my opinion, you get more out of that than torturing yourself for 48 weeks a year and then spending 4 weeks making a fuss for a lot of money. The recovery, as can be seen well with others, unfortunately doesn’t last very long.

Everyone needs a "little escape" from everyday life: it can be a trip to the nearest body of water, the dacha, or a family visit if the family relationships are good. It does not have to be a vacation paid off all year long through a permanent debt relationship. Seeing the same walls and faces 365 days a year can only drive one insane; aside from that, one's own horizon increasingly settles in one place :(

You seem, if I interpret your posts correctly (hardly anything else is possible), not to have had a particularly happy childhood. At this point, I want to point out that by "happy" I do not mean "financially independent."

By the way, other acquaintances and relatives I have hardly ever go on vacation. Only in the "media" are you then surprised to read that vacation apparently is standard for many people. Well, life styles can be that different.

Using other people of the same opinion as reinforcement of your own argument has never been particularly successful.

On the contrary, compared to him I am still a travel pro. On the few occasions where I "had to" go abroad, I took him with me. It was always exhausting and without him I wouldn’t have endured it at all.

So you are not enough for yourself, even temporarily, alone...

But in hindsight, it was an experience each time that one somehow recalls fondly – paradoxical!

That is not paradoxical. However, it proves that you are deceiving yourself inwardly. Your soul – I can’t call it otherwise – is mocking you ;)

Only working for the dream of your own four walls, possibly even nurturing it as an inheritance for your offspring, year in and year out from the same eternal routine – I seriously ask you: don’t you want to include something like living in your considerations?

Rhenish greetings