What loan amount and how much equity capital should be reported to the bank?

Repaying is more sensible with higher interest rates than with lower ones.

No, your calculation applies regardless of the interest rate level. You are comparing the secure return achieved through repayment with the uncertain return generated by an investment (of whatever kind). The decisive factor for your argument is the difference. And this difference is the reward for the risk. The investment with risk will and must always yield higher returns than the risk-free investment.

Why is this not suitable for normal home builders? Because of the risk. Therefore, it is always better to repay quickly, regardless of the interest rate. After repayment, there should still be enough working years left to build up free assets (including stocks).

Phew, I really poked a hornet's nest here. Sure, dear Germans prefer to keep their money under the mattress, in their savings book, in a life insurance policy, and/or in real estate. None of these are particularly good investments. On top of that, almost all Germans are overinsured. We are just an overly cautious people. Furthermore, Germans hardly own any stocks and consequently achieve some of the worst returns with their savings. And of course, in this world, the fastest possible repayment of the property is the golden path. I have now dared to present a low-risk alternative. Naturally, this causes disagreement. I only wanted to show the original poster this alternative and not try to convert every risk-averse person here. Especially since we can also discuss what risk actually is, often measured by volatility. But I feel much more comfortable with tangible assets in today's world than with huge amounts of liquidity in the savings book.

you are writing a huge mess. Any return above 2% in a low-interest phase carries risk. Securities can fall in price, etc. etc. A normal mortal will not check their portfolio every day and possibly take measures.

Even savings bonds that were once concluded are exposed to risk. Or why do banks/savings banks now massively terminate them.

Sorry, to me you are a typical lecturer who babbles only theory and no practice

You just have a different opinion. No reason to get abusive and insulting, right? Yes, securities can fall in price and the euro could be abolished tomorrow. Certain risks always exist; this is no less true for a mortgage loan that you repay quickly. Anything under 2% return also carries a risk, or do you believe your German government bonds are safe?

It’s exactly the same. The interest rate for the loan is the same. If I take out a mortgage loan on my house, the interest does not depend on the purpose of the loan.
So again, would you recommend every citizen and every company take out a mortgage loan and then speculate with the amount? If not, why exclusively for builders?

I’m not talking about speculation. I’m talking about moderate investment. But as I said, for most Germans stocks are dangerous devil’s stuff.

Ok, again.
It is "financially extremely unintelligent" to hedge an investment with a low risk class by investing in a significantly higher risk class. Your investment horizon won’t help you here either because you already know today that you will need amount X at the deadline in 10 years. You can only ride out price dips if you have the time for it.

And of course, this is an investment with leverage and nothing else.

Well, we could now argue about who of us probably has the better financial education. I think I can better judge whether it is intelligent or unintelligent. But I don’t want to argue. Such an investment horizon is perfectly adequate with an appropriately moderate portfolio and some reserves. No, this has nothing to do with leverage. The idea is simply to moderately invest saved repayments and thus theoretically be able to repay the loan significantly faster. Oh yes, and the statement about hedging is simply wrong: The mortgage loan is secured by the property, not by the portfolio. And I could also question your little game with risk classes. Greek government bonds were also considered less risky than stocks just a few years ago. Same with a German government bond. It’s all a question of how you define risk.

No, your calculation is valid regardless of the interest rate level. You compare the secure return achieved by repayment with the uncertain return achieved by an (however structured) investment. Crucial to your argument is the difference. And this difference is the reward for the risk. The risky investment will and must always yield more than the risk-free investment.

Why is this not suitable for normal home builders? Because of the risk. That’s why it is always better, regardless of the interest rate, to repay quickly. After repayment, there should still be enough working years left to build up free assets (including stocks).

No. That is not correct. If I can perhaps achieve 6-7% p.a. with stocks in the long term, then it makes a very big difference whether the loan costs me 1.5% or 6%. You can do a sample calculation and then you will see that it is not always better to repay faster.

I believe this discussion leads nowhere. No one here will want to be convinced. I’m not even willing to convince anyone. If you all think I’m stupid or a hopeless dreamer, that’s fine by me. Just at least consider that I might be right. Everyone should have at least that much critical spirit.

And I certainly don’t want to hijack the OP’s thread here. He has a right to different opinions and is surely not interested in this discussion. He got my opinion; now he can form his own view. Good luck with that.

Dixit.

Best regards
HB1

Well, we could now argue about which one of us probably has the better financial education. I think I can better judge whether this is intelligent or unintelligent. But I don't want to argue.

Your intellectual superiority will surely bring you plenty of returns.

No, that has nothing to do with leverage.

Complete nonsense. Still.

Oh yes, and the statement about the hedging is simply wrong: The mortgage is secured by the property, not by the portfolio.

... and the safety is compromised if no repayment is made or the substitution thereof by the due date did not yield the expected return. All the builders of the 90s went through this, when repayment suspensions were covered by life insurance policies. At the time of conclusion, of course, surpluses were assumed, it was a fat time, and the 10 years before – in retrospect – that would also have worked great. You seem not to understand that. Your construct assumes a secure profit, and this is a fallacy. You have fallen victim to a strong bias, of the finest kind. Hence my question about how much experience you already have with such investments, or whether your head is just in the clouds, clouded by the last 8 years in which you couldn’t go wrong except by not investing.

And I could also question your game with risk classes. Greek government bonds were also considered less risky than stocks just a few years ago. A German government bond as well. It's all a question of how you define risk.

Classification into risk classes by type of asset was already outdated in grandpa’s time, so you don’t need to draw a comparison to badly rated government bonds.

And how you define risk, we have already found out:

of course one can also talk about what risk is, often measured by volatility

I’m rolling on the floor. Seriously.

No. That is not correct. If I can maybe achieve 6-7% return p.a. with stocks in the long run, then it makes a very big difference whether the loan costs me 1.5% or 6%.

Then make a virtue out of necessity and screw the financing costs (oops, apparently a leverage transaction after all), stop buying and put the money directly into the portfolio and remain a renter. I mean it! I am firmly convinced that after 40 years you will be better off than the homeowner. Oh, you don’t want that? Then think about what else you connect with an owner-occupied property besides return. Because you are currently reducing it only to this aspect. Question why you want one like that.
And pssst, don’t you dare tell the lending bank about your plan, otherwise the deal won’t go through or you’ll be terminated without notice as soon as the facts come to light afterwards. But banks usually prevent this cleverly with mandatory repayments.

You can also think about why commercial banks don’t draw billions of euros every day from the ECB at zero cost and make smart investments like the ones you propose. Arbitrage transactions come with certain pitfalls that are apparently completely foreign to you.

I would like to point out that some of the users who respond to you here are known to earn above-average incomes and manage six-figure portfolios (or used to). In this respect, you are putting yourself out on a limb if you want to play the role of financial education instructor here.

Actually, I don’t like having discussions with people who call me stupid every other sentence. But out of interest in the topic, I want to at least partially respond once more.

... and the security is at risk if no repayment is made or if the substitution of it at the key date does not bring the expected return. All the builders of the 90s went through this, where repayment suspensions were covered by life insurance. At the time of conclusion, of course, surpluses were expected, it was a great time and the 10 years before – in retrospect – would have worked wonderfully too.
You don’t seem to get that. Your construct is based on a safe profit and this is a fallacy. You have fallen for a severe bias, of the finest kind. Hence my question, how much experience you already have with such investments, or if your head is just in the clouds, clouded by the last 8 years in which you could do nothing wrong except not being invested.

What I understand is that stocks yield 6-8% return per annum in the long term. If I look at a mixed portfolio, 3-4% p.a. after taxes is still possible. These are very long-term empirical values. I myself have also been investing for well over 8 years and yes, I have already paid my dues. But I know what I am doing, even if you don’t seem to believe that.
But argued differently, let’s suppose my stocks are actually only worth 50% of the purchase price after 10 years. What happens in the worst case? I just leave them for a few more years and take out a higher follow-up loan. You shouldn’t go into such an investment completely penniless.

Classification into risk classes by type of asset was outdated even in grandpa’s times, so you don’t need to draw a comparison to poorly rated government bonds.

And how you define risk, we have already learned:

I don’t need government bonds. We can also gladly take bank deposits, which everyone considers so incredibly safe. I consider my stocks safer than bank deposits in the long run.

How I define risk, you haven’t learned yet. So far I have only explicitly opposed risk assessment based on volatility.

Then make a virtue out of necessity and screw the financing costs (oops, apparently it’s a leveraged deal), stop buying and put the money directly into the portfolio and remain a tenant. I mean it! I am firmly convinced that after 40 years you will be better off than a homeowner. Oh, you don’t want that? Then think about what else you associate with an owner-occupied property besides return. Because you are currently reducing it only to that aspect. Question why you want to have one like that.
And pssst, don’t tell your lending bank about your plan, otherwise the deal won’t go through or you will be terminated without notice as soon as the facts come out afterwards. But banks usually prevent this cleverly with minimum repayments.

You are completely right with your suggestion. Viewed solely as an investment, an owner-occupied home is crap. According to that, I should probably stay a tenant. Why won’t I do that? Obviously because I see other advantages. That’s why an owner-occupied property is consumption and not an investment.

Oh, yes, I will tell the bank about my plan. A good banker will be able to understand my reasoning. I am not the first to do this nor the last. How else should I explain to the banker that I only want to use a fraction of my equity for the house and also only a fraction of my freely available income for repayment? I don’t intend to lie. And I have no problem if the bank wants, for example, a minimum repayment of 1.5%. But if they want more, then it will be another bank.

You can also think about why commercial banks don’t borrow tens of billions of € from the ECB at zero cost every day and make clever investments like the ones you suggest. Arbitrage trades are blessed with certain pitfalls that apparently are completely foreign to you.

An arbitrage trade is when you buy a security in location A at a lower price and sell it in location B at a higher price at logically the same moment. What I am proposing is not an arbitrage trade.

I would like to point out that some users who respond to you here know that they earn above-average incomes and manage six-figure portfolios (or managed). Therefore, you are putting yourself out on a limb trying to play the teacher of financial education here.

Another subtle insult. I am not inclined to teach anyone anything. That is something everyone must decide for themselves. And just because someone earns well or manages six-figure portfolios doesn’t mean they know their stuff financially. I know enough people who earn above average and have a certain wealth but still keep everything in savings accounts or life insurance.
By the way, I have more the impression that you think you need to lecture me.

Yes, I also don't like such discussions in which respect seems to be lacking. You can reread your postings, in which you attribute reduced intelligence, lack of financial education, and German risk aversion to everyone who does not want to follow your argumentation. In this respect, I will not go further into your posting except to recommend reading the Wikipedia definition of arbitrage transactions; it will be enough to stretch your narrow definition of it. Of course, exploiting interest rate spreads is also an arbitrage transaction, whereby risklessness is important by definition, but that is not so important to you. So, go ahead.