Special Repayment: Why You Must Use Your 5% Right

Germany is a country of savers. We love our checking account and our overnight money. But if you have a mortgage, your savings account is probably your biggest enemy.

Most German loan contracts include the right to Special Repayment (Sondertilgung) (usually 5% of the original loan amount per year).

The Problem: "Use It or Lose It"

Unlike a savings account, where you can make up for deposits, the right to special repayment often expires at the end of the year.

If you do not make a special repayment in 2024, you cannot deposit this 5% additionally in 2025. The chance is gone. The compound interest effect you could have had is lost forever.

The Agitation: The Guaranteed Yield

Imagine you have a loan of €300,000 at 4.0% interest. 5% special repayment is €15,000.

If you leave this €15,000 in an overnight deposit account at 3.0%, you pay capital gains tax on the profit. Your real return is much lower.

If you put the €15,000 into the loan, you save 4.0% interest. That is tax-free. 4.0% tax-free corresponds to a much higher gross yield on the capital market. Can you find a guaranteed, risk-free investment with that yield today? Unlikely.

The Solution: Automation

Do not wait until December. Set up a standing order or plan the special repayment firmly into your annual budget (e.g., from the Christmas bonus).

The goal is to keep the Remaining Debt at the end of the rate fixation (e.g., after 10 or 15 years) as low as possible to minimize the risk of refinancing at high rates.

📱 The Amorti Simulation

Let's calculate the difference.

1. Open AmortiApp.
2. Enter your loan (€300,000, 4%, 20 years).
3. Scenario A: No special repayment. Look at the "Total Interest Payments".
4. Scenario B: Go to "Extra Payments" and add €5,000 annually (even if it's not the full 5%).

The difference is often shocking. You will see the term shorten by years and you save tens of thousands in interest.

Do not give away money to the bank. Use your right.

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