Special repayment in the loan contract - experiences with financing

Hello dear home builders,

we are currently in the final stages of our construction financing and have a question for the community about [Sondertilgung].

A consultant suggested that we forego the [Sondertilgung] in the large annuity loan, which would give us a slightly better interest rate. At the same time, we will have a [KFW] loan ([Hausbau kfw55]) running. According to him, it would be more sensible to make [Sondertilgungen] on the [KFW] loan in the first 10 years, since after 10 years you can legally make [Sondertilgungen] on the annuity loan at any time (with a 6-month notice). Is this correct? Can you recommend such an approach? What should we keep in mind?

Thank you very much in advance

I'm not that up to date with KfW, but it might not be allowed to make special repayments with KfW at all. You can fully terminate the annuity loan after 10 years and take out a new one minus a repayment. But just repaying a part of it is not possible. Your advisor is quite funny (shady) if he calls the special termination a "pre-notification" :D

Instead of special repayment, you can of course save the money and invest it conservatively. You have a good chance of earning more returns than you save in interest with special repayments. It's a matter of personal preference which path you want to take.

I'm not that up to date with KfW, but it might even be the case that you are not allowed to make special repayments with KfW.
You can completely terminate the annuity loan after 10 years and, minus a repayment, take out a new one. But simply paying off part of it is not possible. Your advisor is pretty funny (shady) if he calls the special termination a "pre-notification" :D

Instead of special repayment, you can of course save the money and invest it conservatively. You have a good chance of earning a higher return than the interest you save by making special repayments. It’s a matter of preference which way you want to go.

Well, I haven't found much on Google about how special repayment after these 10 years and 6 months should work. I mostly read a lot about termination, but what matters to me is special repayment. As a layman, this suggestion initially sounded good, but if it were that easy, I surely would have heard about such an option beforehand?!

We're more the type who want to pay off the house quickly :) So investing is out for us at the moment... (Except maybe someday again in Bitcoin :))

Best regards

At least until a month ago, it was still the case that you could not repay the KfW loan early (or not without fees) within the 10 years. After the 10 years, you can simply repay it.

At least until about a month ago, it was still the case that you could not (or not free of charge) make special repayments on the KfW loan within the 10 years. After the 10 years, you can simply repay it.

Yes, that is currently also the case. You can make some special repayments, but not the total amount or only with a prepayment penalty. We are talking about an annual special repayment of approx. 5,000 EUR.
But I just saw that the KfW loan interest rate has gone down again? It was 1.1% last week...

You cannot make special repayments on KfW loans, we had also informed ourselves about that.

After 10 years, you can make special repayments on any loan, whether KfW or a bank loan, or terminate/extend it, whatever... What your bank advisor is saying is pretty nonsense in my opinion :D

If you want to pay off quickly, I would definitely include a special repayment option, alternatively set the money aside and then put it in and repay after 10 years (although I also think that’s nonsense... Better to pay more interest and make special repayments monthly/annually right away ---> inflation and all that :D)

Another alternative, as already mentioned above, would be to invest the money accordingly and not make special repayments... But those are ultimately two completely different things, and everyone has to decide that for themselves.

Edit: May I ask how much the interest rate differs between "no special repayment" and "special repayment option"? I find that kind of strange... I’ve never heard of that :D 5% special repayment should actually ALWAYS be included in my opinion... At least that was standard with every bank we inquired with, without an extra charge.