The Smith Clan - Mortgage free in Germany

Egon76 · 17 May 2018 at 1:07PM

On and off I have been making attemps to trying to pay off the mortgage early. We kept falling off the bandwagon. I am getting frustrated with myself, as the mortgages and the renovation credits are the only "debts" we have. Mr. Egon76 is partly on board. He likes the idea of paying off the mortgage early - but doesn't like to make too many concessions. In his favour, I have to say he is lots better than he was when I met him.

We moved a lot over the years and one mortgage replaced another with each move. Now we have settled for the near future (as we have been in this place the longest so far - 7 years!), I want to get rid of the mortgage. We do know, that one more last move will be in our future. But this should be years away.

Our son's both have expensive hobbies. But this is something we will not stop, as both only have 1 (DS1) and 2 (DS2) hobbies respectively. They are loving them and have been doing them for years.

I do believe that by writing a journal, it will stop us from going astray and focusing even more on paying off the mortgage.

I will post the figures and some more thoughts later tonight, as I first have to do a budget update.

Egon76

shangaijimmy · 17 May 2018 at 1:24PM

Welcome onboard.

Tropically · 17 May 2018 at 2:04PM

Welcome and good luck!

Egon76 · 17 May 2018 at 3:15PM

Thank you, we will need it!

Egon76 · 17 May 2018 at 4:39PM

Now that I have updated all figures....

We live in one of the bigger cities in Germany. House prices are not the highest for Germany, but like in any city the prices are high.

When we moved to Germany a few years back, we bought a flat as investment nearer the city center. We also bought the house we live in. On top we took out a credit to renovate our house inside. We don't have any further depth, which we are very proud of.

Now to the mortgages...

On mortgage 1 for the house we took out Euro 135000 in 2011. It is fixed for 10 years. The interest rate is 4.75%. We can make one yearly overpayment up to 5% of the borrowed amount.
On mortgage 2 for the house we took out Euro 85000, also in 2011. Again, it is fixed for 10 years. Only by taking out two mortgages, could we cover the costs of buying the house. The interest rate is 4.35%. This mortgage repayments have to be paid every three month. We tried to get it into a monthly payments, but they wont let us.

Also, I just re-read the conditions, and I am not sure if we can make extra payments...:undecided I better contact the bank to clarify.

We can remortgage in 2021. The bank is already trying to talk to us to see if we want to secure a low interest mortgage. Yes, the interest rates are low. But if we commit now, they will calculate extra interest on top of the new rates for each month we secured it early. We have decided to wait on this and look into remortgaging nearer the time. In the hopes that interest rates are staying lowish.

The renovation credit of Euro 50000 we took out in 2015. It is fixed for 10 years and the interest rate is 2%. This credit will just run its course, as it is the lowest interest rate we pay.

The mortgage for the flat Euro 113000 was also taken out in 2011. Again, it is fixed for 10 years. Interest rate is 4.23%. No overpayments will be done on this. The flat is rented out. Any costs - incl. the mortgage - can be set off against our tax at the end of the year.

We still have a lot to do on the house. The inside has been renovated in stages since 2012 - and is now finished :beer:, so we now are concentrating on the outside. There is still lots to do outside.

To start, I need to get on to do the following:

[STRIKE]contact the bank to clarify if overpayments can be done on mortgage 2 house - May 2018[/STRIKE] no overpayments possible
[STRIKE]overpayment of 5% (Euro 6750) on mortgage 1 house - May 2018[/STRIKE] overpayment on 18/05/2018:j
[STRIKE]
contact bank to clarify monthly installments when repayment upped to 2% and 3% - May 2018[/STRIKE] sorted. As of June, we will be paying the possible max of Euro 843 a month
re-do budget for further savings - July 2018
further saving accounts/flexible savings July 2018 (as we can't overpay as much as we like, I want to find best possible savings accounts)
overpayment of 5% (Euro 6750) on mortgage 1 house - January 2019

The next post I will be looking at the budget as it is now. I realised whilst writing this post, that we can't overpay as much as we liked. It will free money to carry on with the outside. :cool:

One important point I have forgotten! We are aiming to pay off the mortgage on the house in 5 years.

Egon 76

julicorn · 17 May 2018 at 8:17PM

Hi Egon! Happy new diary. I'm looking forward to seeing how you get on (and as a German who's bought property in the UK, I'm always secretly curious about how that whole system works in Germany).

Egon76 · 18 May 2018 at 12:41PM

julicorn wrote: »

Hi Egon! Happy new diary. I'm looking forward to seeing how you get on (and as a German who's bought property in the UK, I'm always secretly curious about how that whole system works in Germany).

I remember the times we bought in the UK. To me it feels like, we hade more choices then. Also, it felt like we paid it back quicker. But then, I could have distorted memories

Egon76 · 18 May 2018 at 12:46PM

Egon76 wrote: »

mortgage 2 house: Also, I just re-read the conditions, and I am not sure if we can make extra payments...:undecided I better contact the bank to clarify.

So, the bank said no. We need to think about Plan B then. Interest rates are very low. But still, I want to put a lot of the money aside, so we can pay off a big chunk in three years time when it comes to remortgaging.
I already had a quick dip into this yesterday. I will have to do some serious research over the weekend.

Off to research for some plausible savings accounts in Germany.

Egon76

Egon76 · 18 May 2018 at 10:27PM

Mr. Egon76 returned today from his business trip. We had a good long chat about the mortgage and how we would like to move forward.

We have looked at the existing mortgage 1+2 house, to see what our options are. Mortgage 2 house - as mentioned in an earlier post - we just can pay the regular payment every month. This will run its course until it is time to remortgage.

Now, mortgage 1 house is the one with the highest interest rate. It is also the one were we, right now, can make the biggest difference.

According to the mortgage agreement, the repayment is 1% of the borrowed amount. We can up this to 2 or 3%. I will speak to our bank, to see what the 2 and 3% will come to in the monthly installments. A decision will be made when we have the actual figures.

Also, we do have some savings. We decided, that we will pay in the 5% yearly overpayment of Euro 6750 this weekend. The money has been transfered by me just before I started this post. :T

The aim is, to up the monthly installments and also to make an overpayment of another 5% (Euro 6750) in January 2019.:eek:

I will also update the post with my to do list. :cool:

Good night to everyone

Egon76

Egon76 · 22 May 2018 at 8:14AM

Last weeekend was a long weekend here in Germany. Lots of sunshine and relaxation.

I have now written to the bank, to find out how high the monthly payments will be if we change to 2% or 3% mortgage repayment. A final decision how to move forward will be made after we have all the figures.

I also did an budget update. We had to amend (up) the money going to towards the house improvements and the motocross hobby for DS2. :cool:

On the front of the flexible saver account... interest rates over here are really low.

Our current flexible savers account pays 0.04% once a year. The best I have found has an interest rate of 0.95%. This would be with a bank in Malta. Does anyone has any experience with that? :cool:
We are more inclined to just go with increasing the monthly payments....

I am also changing jobs in three month time. I will receive slightly less on the salary side. I already factored this in as well. I am so looking forward to my new job.

Off to get some work done now.

Egon76

ag120 · 22 May 2018 at 8:45PM

Hi @Egon76 from another Brit in Germany

as you seem to have more than one property in Germany (I assume that the others are rented out?) - do remember that you can offset mortgage interest on your rented property against tax. On the face of things, it would be better to pay off the mortgage on the house you live in first because of this. Do you do a tax return in Germany? It can be a bit painful, but worth it in my previous experience (although I don't yet have property).

How have you found the mortgage system over here? I'm thinking of getting on the property ladder but the mortgage / banking system seems so old fashioned an inflexible.

The Smith Clan - Mortgage free in Germany

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