Building Society Contract vs. Repayment: The Interest Bet

For many German (and European) property owners, a complex question arises: "I have extra money. Should I put it into my current mortgage (special repayment) or fill my building society contract (Bausparvertrag)?"

The answer is not simple. It is a bet on the future of interest rates.

The Problem: The Rate Fixation Ends

Your current mortgage may still run for 5 years with a favorable rate of 1.5%. But what happens after that? If market rates are then at 5%, your monthly installment will explode.

This is where the Building Society Contract comes into play. Old contracts often guarantee a loan at very low rates (e.g., 1.5% or 2%) when they mature.

The Agitation: Opportunity Cost Today vs. Security Tomorrow

It is a calculation example:

1. Option A (Special Repayment): You repay your 1.5% loan today. This saves you hardly any interest (only 1.5%). The money works "poorly."
2. Option B (Building Society): You put the money into the savings plan. The savings interest is tiny (0.1%). BUT: You secure the right to get a loan at 1.5% in 5 years, instead of the market rate of 5%.

If market rates in the future are high, the building society contract is mathematically superior, even if it seems like "dead capital" today.

The Solution: The Allocation Check

You must check when your building society contract will be ready for allocation.

• Does the timing match the end of your rate fixation?
• Is the building society sum high enough to cover the remaining debt?

If the answer is "Yes" and you fear rising rates, prioritize the building society contract.

If you believe rates will fall, or if your current loan is very expensive (e.g., 4%+), direct repayment is usually better.

📱 The Simulation on Amorti

Use AmortiApp to forecast the "Remaining Debt."

1. Enter your current loan into AmortiApp.
2. Look at the amortization schedule at the time "End of Rate Fixation" (e.g., Month 120).
3. Note the Remaining Debt (e.g., €150,000).
4. Check if your building society contract can cover this gap.

Planning is everything. A gap in financing can cost you the house.

Do the math. Secure your future.

Calculate Remaining Debt on Key Date