Repay or invest?

Should spare money go into special repayments or an ETF? Compare net worth and the break-even return.

€34,866 richer by investing

Investing the €300 leaves you €34,866 richer after 31 years. Investing wins only above a return of 4.96%.

Repaying is a guaranteed, tax-free return equal to your loan rate. Investing can earn more but can also fall – €79,056 of interest saved and 9 years 4 months less debt are certain. Check how much extra repayment ( Special (extra) repayment German: Sondertilgung Money you pay on top of the regular rate to reduce the debt faster. It only works if your contract allows it – typically up to 5% of the loan per year for free. Every euro repaid early saves the interest on it for the rest of the term. All terms in the glossary ) your contract allows per year.

Your loan

Loan amount Darlehensbetrag Loan amount German: Darlehensbetrag The amount you borrow from the bank – usually the purchase price plus incidental costs, minus the own capital you bring. All terms in the glossary

€

Interest rate Sollzins Nominal interest rate German: Sollzins The yearly interest rate on the loan, without fees. The bank charges one twelfth of it each month on the remaining debt. To compare offers, look at the effective rate instead. All terms in the glossary

Repayment Anfängliche Tilgung Initial repayment rate German: Anfängliche Tilgung The share of the loan you repay in the first year, in percent. Together with the interest rate it sets the monthly payment: (interest + repayment) × loan ÷ 12. Because interest falls over time, the repayment grows each year. 2–3% is common; below 1.5% the loan takes very long to pay off. All terms in the glossary

Fixed for Zinsbindung Fixed-rate period German: Zinsbindung How long the interest rate is guaranteed, typically 5–20 years. After it ends, you have to refinance the remaining debt at whatever rates apply then. By law you can cancel any loan 10 years after payout with six months' notice, without a penalty. All terms in the glossary

years

Rate afterwards Rate afterwards The interest rate you expect after the fixed period ends. Nobody knows it – try a pessimistic value. A higher rate makes early repayment more attractive.

Spare money

Extra per month Repay it or invest it? Extra per month Money you can spare every month on top of your normal loan payment. It either goes into extra repayments (Sondertilgung) or into an investment such as an ETF savings plan.

€

Expected investment return Per year, before tax Expected investment return What you expect the investment to earn on average. Broad stock ETFs have returned about 5–7% a year over long periods, but with big swings and no guarantee. Savings accounts pay far less.

Assumptions

Tax investment gains Abgeltungsteuer · When selling at the end; the saver's allowance is left out Flat tax on capital income German: Abgeltungsteuer A flat 25% tax on interest, dividends and investment gains, plus the solidarity surcharge and possibly church tax – 26.375% in total without church tax. German banks deduct it automatically. All terms in the glossary

Invested in Teilfreistellung Partial tax exemption for funds German: Teilfreistellung Part of the gains from investment funds is tax-free, because the fund already pays some tax itself: 30% for equity funds (e.g. most stock ETFs) and 15% for mixed funds. Bond and money-market funds get none. All terms in the glossary

Compare after 0 = when the regular loan would be repaid Compare after The point in time at which both paths are compared. By default that is when the loan without extra repayments would be paid off.

years

Results update as you type.

Advantage of investing Advantage of investing How much richer investing leaves you compared with repaying early, at the end of the comparison. A negative value means repaying early wins.: +€34,866
Break-even return Break-even return The yearly investment return (before tax) at which both paths end up equal. Investing only pays off if you expect to earn more than this – reliably.: 4.96%
Interest saved by repaying Special (extra) repayment German: Sondertilgung Money you pay on top of the regular rate to reduce the debt faster. It only works if your contract allows it – typically up to 5% of the loan per year for free. Every euro repaid early saves the interest on it for the rest of the term. All terms in the glossary: €79,056
Debt-free earlier by Debt-free earlier by How much sooner the loan is fully repaid if the spare money goes into extra repayments.: 9 years 4 months

Net worth over time Net worth over time Net worth here means what the investments would be worth if sold (after tax) minus what you still owe on the loan. The higher line is the better path at that point in time.

Investments after tax on selling, minus remaining debt

Remaining debt Remaining debt German: Restschuld What you still owe at a given time – most importantly at the end of the fixed-rate period, because that amount has to be refinanced at the rates of that time. All terms in the glossary

Extra repayments shorten the loan