When will I pay back my mortgage?

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Dr. Christian Mulder Jan 28, 2019
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This repayment calculator will give you a first glimpse of how quickly you can and should repay your mortgage. We understand the mortgage decision process can be difficult. In the following article we hope to dive into the three most important aspects to consider.

In this mortgage calculator, we will try to help you to understand how to evaluate these questions, start be personalising the article to your situation below:

Forecast your repayment plan

I want to purchase a property of

€ 200,000 in
real estate commission. I want to put down
€ 50,000
as a downpayment. I want to have an annual principal repayment of
2 %
and fix the interest rate for
10 years
.

Your monthly repayment rate:
NaN
Remaining loan balance after NaN years:
NaN
Total purchase fees:
NaN
Interest rate:
NaN

For further help or a formal mortgage offer we urge you to use our online questionnaire to see what you can afford or find out which mortgage product is right for you.

Every mortgage boils down to three main decisions to consider:

  • How long should I fix the interest rate
  • How quickly should I repay my mortgage
  • How much equity or downpayment to use initially

How is my monthly rate calculated?

In Germany, the majority of mortgages are so-called annuity mortgages. An annuity is a loan with a fixed annual payment, in other words the same monthly payment.

Mortgage payments are composed of two parts, the principal or the amount you pay back and the interest, the cost of borrowing the loan.

For example, having an interest rate of NaN and a principal of NaN yield an annual payment of NaN. Given a loan amount of NaN, this implies you pay back NaN annually, or NaN per month.

It’s worth noting that as you pay back, while your monthly rate of NaN remains constant till the end of the fixed period, your principal increases as the interest on your loan decreases. This can best be illustrated in the amoritiziation table below.

What’s the minimum repayment rate?

The lowest possible repayment with a few selected German lenders can be as low as 1%. There are generally no interest-only loans in Germany. In contrast, the leveraging effect is much higher, hence buyers are able to have higher borrowing limits up to 100% of the value of the property. A low repayment comes with consequences, for example a high refinancing risk which we will explain below.

How do I choose my repayment rate?

You can use our recommendation online to understand what we would recommend you to repay when it comes to your personal situation including retirement and other factors like whether you have alternative investments. Choosing the right repayment rate depends on many factors including whether interest rates are expected to increase.

What are the purchase fees in ?

Purchase fees:
Commission-free property:
NaN
Full commission property:
NaN

By borrowing NaN today and choosing a NaN repayment, you would be done repaying in years and would have a loan balance of NaN after NaN years.

You could accelerate your repayment using extra repayment options of up to NaN on an annual basis.

What happens at the end of my fixed interest period?

At the end of your fixed interest period you have a remaining loan balance of NaN. The higher the principal repayment the lower the loan balance. Use the graph above to see your repayment forecast.

What is refinancing risk, how do I manage it?

Refinancing risk refers to the risk that you have to refinance your remaining loan balance at the end of the fixed interest period at a higher interest rate in the future. Given that German interest rates are at historical lows, you may wonder why not lock them in for as long as possible. This is a common misconception, as the mortgage products with longer fixed interest periods also have a higher interest rate. For example, a 10-year mortgage product might have an interest rate of 1.5% whereas a 15-year product might be 2%. The difference of 0.5% is often referred to as a 5-year insurance. Therefore, customers who cannot afford taking a refinancing risk, where a higher interest rate exceeds their monthly household budget, they are recommended to fix the interest rate for longer.

How long should I fix the interest rate for?

This is the most complex question that we will help you answer. This depends on several factors, including whether you can afford the refinancing risk. This depends on how your income grows over time and whether your property value increases. These so-called risk mitigators can often offset the risk of refinancing at a higher interest rates. There are a number of other factors to consider — most importantly how long you are expecting to stay.

To help you understand how long you should fix the interest rate, how quickly you should repay and how much equity you put down initially we have built a recommendation engine which takes your eligibility criteria, recommends the ideal mortgage product and then finds the best lender from over 400 lenders. To get started simply click here.

What is a extra repayment? Should I use it?

The sondertilgung refers to an annual extra repayment besides your regular monthly payments. German lenders give you the ability to make extra repayments once a year between 5% - 10% of the principal loan amount.

The sondertilgung is a powerful way for you to hedge against future interest rates rising. For example, if after 5 years you see interest rates are increasing and you are worried about your refinancing risk, you can use extra repayments to reduce your remaining loan balance.

Use Hypofriend’s affordability calculator to see what you can afford based on your personal situation.