Special repayment, saving or consumption?

As of today, it will probably be very difficult for people with an average forum salary (5,000 € - 5,500€ family net) and no inheritance to be done by 40. But before Corona it was definitely still doable, at least here (small town in Bavaria, not in the middle of nowhere). At that time, the combination of construction prices / interest rates was still very favorable. It presupposes that one started saving immediately after training with the average or below-average salary. And the loan amount can be reduced by being modest with the square meters of the house or the equipment. Or by contributing above-average personal effort. We did not want to do without the equipment. So we put in a very, very large amount of personal effort. It looks like we will be done in about 5-6 years if we continue to make special repayments. We will then be 40/38 years old.

I totally agree, but for me that is the best-case scenario. You don’t assume that salaries will suddenly disappear, someone becomes unemployed, seriously ill, unable to work, or maybe even dies. The house of cards collapses at that moment or it becomes very, very difficult depending on the situation. We are exactly the opposite – worst-case scenario – and that’s why we wanted to get rid of the debts quickly. If something should happen, at least no one has to worry financially – the house is paid off and the ongoing costs can be managed on your own. In such a moment, a few percent return doesn’t help you if you have a huge debt mountain, no income, and the financial investment isn’t yet where it would need to be for a payoff.

And exactly from this worst-case scenario we acted accordingly. Our thoughts were the following:

If one or both don’t lose their job or can no longer work, we can currently cover the capital service with this money for about six years and we can continue living in the apartment without having to rent somewhere else. Both being unemployed is practically impossible in our constellation; we are well insured against loss of earnings due to illness or occupational disability. Because of personal experiences regarding this, we are rather conservative. This is also why we decided against a house and for an apartment a few years ago. So that not everything is hanging by a thread and the house of cards doesn’t collapse...

We have split our money into different forms of investments and can access everything within a few weeks. This thought especially reassured us before the birth of our daughter, because we didn’t know before how it would be with a child and whether she would be born healthy.

I can also understand your point of view well. Maybe in a few years we too will reach a point where we pay off the loan in one sum if by then we have enough money =) I don’t want to rule anything out at the moment.

I would like to know the modest income to understand how one "just" makes an extra repayment of 40,000 EUR.... ;)

We now have 4400€, with health insurance still deducted for my husband since he is now retired. The 40,000, more precisely 37,000, is made possible by part of the paid-out company pension, among other things. I could have done it with my savings as well, but I am already responsible for the annual 5% extra repayment :cool: P.s. We have waived the mainstream equipment "I absolutely want".

If one or both do not lose their job or can no longer work, we can currently cover the debt service with this money for about six years and we can continue to stay in the apartment and do not have to rent somewhere else. Both being unemployed is practically impossible in our situation; we are well insured against loss of earnings due to illness or disability.

I believe the normal case is that every family can compensate for some loss of income, even without large reserves. Vacations, cars, food... everyone has options there. But if the income completely breaks down, e.g. because I could stand out as the sole earner, then a sale becomes necessary. Everyone should be aware of this reality before buying a house. The idea of being able to stay in your own home under all circumstances until death is a utopia. And no, even a fully paid-off house does not help. A good example is divorces: on the one hand, accrued gains have to be balanced and paid out; on the other hand, a paid-off house represents a nice living value that is considered notional income and drives up maintenance payments. You cannot avoid child support; this is where home ownership usually ends.

but I am already responsible for the annual 5% special repayment

5% special repayment is already quite decent. Currently that would be several months’ net salary for me. But I am still at the beginning of repayment. Maybe in 20 years with current inflation and salary increases it will be quite easy.

Now I have to ask a stupid question: How do you manage with children? How can you pay off so much without significantly restricting yourself? For us, there are already €500 per month for daycare/food, then (a special case for us) maintenance payments of almost €600. Then the children's sports equipment with also €100 monthly. Then a swimming course for €90 here, holiday care for €260 there, and so on. Birthdays and Christmas are not even included. And we buy everything second-hand whenever possible. What is left over practically goes straight into the house and garden. We are currently not saving anything. Prepayment after 6 years is zero (but we were honest with ourselves and didn’t expect anything). We don’t earn badly now. We have a household net income of €5k. Our rate for all loans is €2000.

Now I have to ask a stupid question: How do you manage it with children? How can you pay off so much without significantly restricting yourselves? For us, the daycare/food costs are already 500€ per month, then (special case for us) maintenance payments of almost 600€.

You answered it yourself: You have over 1000€ more expenses than comparable families. I also always get upset that daycare costs money here, but not in the next district. Unfair!