Pensions: debt repayment and investment are an explosive mixture

The rapid repayment of home equity loans is the best investment for most individuals. The financial question.

The fourth decade is a period of life with far-reaching consequences for individuals. Some opt for family, others indulge in the first separation, and the third dispense with experiments and enjoy their solitude. Each model has advantages and disadvantages, but in financial terms, the separate ways. The divorce group is when miracles do not happen, come under the wheels. The single-group will be to take care of with the help of long-term savings contracts, presumably shares and property their retirement. And the young families will if the means exist to deal with the construction or purchase and financing a home.

Your own roof over your head is by far the biggest investment of their lives for most individuals. It usually goes to large sums of money, and the project is, with few exceptions, to be paid only with the help of loans.

Consequently, the project should be not only technically, but also in economic terms, on solid ground. Of these, hardly possible to speak in practice, of course. Around two-thirds of all financing should be sewn on edge. The loans are high and the repayment of the loans is low. But that is not aware of many self Heiman. They live in the belief that low-interest rates are associated with lower repayment gateway to paradise. Admittedly, this is a massive misconception, because the long maturities will provide many private individuals aged faces enormous problems.

The owner-occupied property is an important cornerstone of retirement, but he should not be the only component in addition to the statutory pension. In retirement, because the state pension is not sufficient as a rule to make ends meet, consumable capital in the form of cash, bonds, and stocks may be necessary. This means in plain language that the iron principle applies in the financing of homes: Either the house is up to the 50th birthday of the owner of the debt, or the owner has so much fat on the ribs, that he not only pay off the debt but at the same time can build additional capacity. The opportunities and risks are clearly in the following example.

A couple offering it – almost evenly – at 70 years of age. He is 36 years old, she is 34 years young, and the couple has two children aged four and two years. The parents are working, and there’s nothing should change and if possible in the future. He is a physicist, she is a biologist, and the annual gross income of the two scientists is EUR 120 000 per year. Of these, around 5,600 euros a month remaining after deduction of social security taxes, and with parts of the net salary for a house to be funded, which costs about 350,000 euros, but will come to 371,000 euros because of the additional costs of 6 percent overall.

The parents have made any slip-ups professionally and financially in recent years. They have solid training in your pocket. The two jobs throw from ordinary salaries. It is a private liability insurance available. The two parents are members of statutory health insurance. You are covered for disability. The spouses have reserves of 40 000 €. And they have saved up about 100 000 euro for home ownership. The money is on current accounts in savings agreements and federal treasuries. Now the contracts are to be resolved, and it should be taken a loan of 271,000 euros.