What is more worthwhile - calculation methods?

Hello,

we currently live in a house that we have financed. The loan has an 1.61% effective interest rate, which is not bad at all, and can be flexibly repaid between 1-10% (currently 10%). In addition, there is the option of a 5% (9,000€) special repayment which we have always used so far. Thus, we have repaid the original loan of 180,000€ down to 87,200€ today. The fixed interest period runs until October 2025. If we continue to repay at this rate, we would be finished relatively quickly.

Now we want to build a new house and would like to take out financing for this again.
Approximately 300,000€ are needed, which we would currently get for about 0.75% effective interest rate.

If we rent out the current house, we are able to repay a total of 2,800€ per month.

Now the question arises as to what we should do with the current loan.
Is it cheaper to repay the new loan as much as possible and possibly reduce the other loan to 1% repayment, or should we first pay off the old loan and keep the new one’s repayment as low as possible? Or maybe in a certain ratio? Or even take out the new loan 87,200€ higher and repay the other one in advance?

How does one calculate this?
Unfortunately, I haven’t found much about this on the internet, but I am also not very familiar with the subject.

Is there anyone here who can calculate this? What information do you need for that?

There are repayment calculators, e.g. from Interhyp - just google it. You can run through your 3 scenarios there and see where more remains.

Sorry, I did find the calculator but I’m stuck on what exactly I need to enter.

Variante 1
If I lower the current loan to 1% repayment, there will still be an outstanding balance of 65K€ until 10/2025 and we pay interest amounting to 7,500€.
For that, we would have significantly repaid the new loan, an outstanding balance of about 165K€, and paid about 8,750€ in interest until 10/2025.

Interest paid until 10/2025 16,250
Outstanding balance: 230K€ (65K€ at x% and 165K€ at 0.75%)

Variante 2
Repayment old loan 10%
Interest 2,900€
Outstanding balance 0 in 07/2023

Repayment new loan 3.5% until 07/2023 and 10% afterwards.
Interest 11,800
Outstanding balance 185,600€

Interest paid until 10/2025 14,700€
Outstanding balance 185,600€ at 0.75%

Is that roughly correct?

It still seems illogical to me why you would then have paid more interest but have less outstanding balance.
That would clearly make the second option better.

Unless I still haven’t quite got it yet. :)

Well, with V2 you paid off more and consequently have a lower remaining debt, as well as paid less interest. Sounds logical and like the better option. You can also enter the extra repayments in the calculator, maybe you'll come up with a 3rd option.

Now the question arises what we should do with the current loan. Is it cheaper to repay the new loan as much as possible and possibly reduce the other to 1% repayment, or should we first pay off the old loan and repay the new one as little as possible? Or maybe in a certain ratio? Or even take out the new loan higher by €87,200 and repay the other one in advance?

How do you calculate that? Unfortunately, I didn’t find much about it on the internet, but I also don’t know enough about the matter.

The principle is to repay the more expensive loan first, so the old financing. If you can even replace it with the new financing, all the better. Except: the old building is rented out. Then you can deduct the interest from taxes. Possibly, the return on equity can even be increased if the old property is refinanced again to have more debt in it. Then reduce the repayment to 1%.

This is a case for the tax advisor. As a self-employed person, you probably have one on hand anyway.

Yes, it should be rented out. That is a great idea! I will talk to my tax advisor. Let's see what he says. But you have made it harder for me now. :)