Mortgage vs Investment Calculator
Should you pay off your mortgage early or invest the extra money? Compare both strategies side by side with accurate German mortgage modeling and tax calculations.
FAQs
The core comparison is your mortgage interest rate against your expected after-tax investment return. If your rate is 3% and a broadly diversified portfolio might produce 5–6% net over time, investing the surplus could produce a better financial outcome over a long horizon. But paying down the mortgage offers a guaranteed, risk-free saving equal to your interest rate — which no investment can promise. Many people explore a balance of both.
Most German mortgage contracts (Annuitätendarlehen) allow annual extra repayments called Sondertilgung — typically 5–10% of the original loan amount per year, at no penalty. These reduce your outstanding balance, which lowers total interest paid over the loan term. Check your Darlehensvertrag for the exact allowance; not all contracts include Sondertilgung, and some older contracts may not offer it at all.
A broadly diversified global equity ETF has historically returned around 7–8% per year nominally, or 5–6% after inflation. Many projections use 5–6% as a working estimate to account for costs and uncertainty. German investors also pay Abgeltungsteuer (26.375% flat rate) on capital gains and dividends, which reduces the effective after-tax return — worth factoring in when comparing against the guaranteed saving from mortgage repayment.
Not on your primary residence. Germany does not allow homeowners to deduct mortgage interest on the home they live in — unlike some other countries. There is no tax incentive to maintain a large mortgage on a home you occupy. The situation differs for rental properties: if you rent the property out to tenants, mortgage interest is fully deductible against rental income.
A Zinsbindung (fixed-rate period) locks your interest rate for a defined term — commonly 10 or 15 years in Germany. When it expires, you refinance at prevailing market rates. If rates have risen significantly since you first borrowed, your monthly payment can increase substantially. Making extra repayments (Sondertilgungen) during the fixed period reduces the loan balance exposed to this rate risk at refinancing.
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