Mortgage repayment means you regularly pay off a portion of the mortgage so that it's repaid over a predefined period. There are two versions: direct and indirect repayment.
The right mortgage strategy includes the right repayment plan. You can either repay your mortgage all at once or in equal-sized, small tranches over a longer period of time.
Repayment in detail
When you purchase a property, you must contribute at least 20% of the property's value from your own capital. The bank's financing will not exceed 80% and is split into two mortgages:
- First mortgage: max. 67% of the property value
- Second mortgage: max. 13% of the property value
In contrast to the first mortgage, repayment is compulsory for a second mortgage. You must repay the mortgage within 15 years or before you reach retirement age, whichever comes first.
In the case of direct mortgage repayment, the debts are reduced regularly – normally quarterly – by a fixed amount. In this way, the debt amount and interest burden is reduced. However, since mortgage interest is tax-deductible, the tax burden increases over time for direct mortgage repayment.
- Mortgage debt decreases
- Mortgage interest charges reduce
- Taxes increase because of decreasing mortgage interest payments
- Contributing to a private pension (pillar 3a) in addition to repaying the mortgage is only possible if there is enough financial flexibility
In the case of indirect repayment, the debt remains unchanged. As a home owner, you deposit the repayment amount into pillar 3a, which is in turn pledged to the bank as collateral. The capital is disbursed at the latest on retirement, and the mortgage is repaid in that amount.
- Mortgage interest payments are tax-deductible.
- Your privately invested money (pillar 3a) can benefit when the stock market rises.
- The mortgage debt is not reduced.
- Mortgage interest payments remain unchanged.
- Your privately invested money (pillar 3a) is at risk from fluctuations on the stock market.
Mortgage repayment – but how?
- Verification of the purchase price based on reference properties and location
- Comprehensive information on the municipality, price level and tax rate
- Development of the perfect financing strategy for you
- On request: mortgage decisions within 24 hours
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