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Dividend ETF as a redemption substitute

I have to decide on June 30 whether to repay a home loan of around €60k or continue financing at 3.99% for 10 years. I have the money in my call money account.

I had now considered whether I would rather put the money in a boring dividend ETF like the $TDIV (-0,96 %) instead of paying it back.

The dividends will more or less cover the interest. I can invest and withdraw the 2% repayment that I have to make separately as a money market ETF.

After 10 years, the dividend ETF should have gained so much in value that I should be able to repay the loan and still have something left over. Or is that too risky?

10 Comentarios

Dividendenopi👴@Dividendenopi

Repay and make a savings plan on an ETF of your choice with the previous monthly interest and repayment installment

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G_Capital@G_Capital

@Dividendenopi...you can't say it any better than that!

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Frank K.@Gazza

I would pay off the loan at 4%

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Nuqqx@Nuqqx

So I'm absolutely not a fan of investing borrowed money...
Of course it can go well with such an ETF, but imagine you get a massive crash on the financial market in the 9th year, then the ETF is not protected from it either.

My recommendation: redeem and invest the free cash flow, then you are on the safe side and not exposed to even greater pressure in the event of a correction.

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Kai@Dividenden-Sammler

Loan due to real estate financing for rental or own use?
It should actually be clear what needs to be done in each case.
Or how high is the loan still?

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Dividendenopi👴@Dividendenopi

Has anyone asked whether it is owner-occupied or rented out? 😇If owner-occupied, see my answer 👆, if rented out, it may well make sense to continue financing for tax reasons

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Chris@IronEagle

The property is owner-occupied and has now been paid off down to around €60 thousand.
The trend is clear and I think I'm right to pay it back and invest the liquidity.
In the past, I often had clients with life insurance policies as a repayment substitute. It was really stupid in the zero interest phase when you actually needed a 5% return.

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Wealth-Accelerator@Wealth-Accelerator

With the interest rate, I am clearly in favor of repayment. In this case, the good-night yield is higher over 10 years 👌🏼

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NichtRelevant@NichtRelevant

In my view, both are possible and justifiable - 60tsd is probably not so much as to kill you if the dividend ETF is in a bad position at the end of the new fixed interest period in 10 years. I also wouldn't expect a $TDIV to suddenly go completely under.

In the case of owner-occupied property, however, I would probably actually redeem it because the stress on the structure would be too great and the upside too low.

As food for thought, if you also invest in rented properties: If you have fully repaid the owner-occupied property, you have a free land register, which you can use as additional collateral for another project if necessary. For example, to avoid using equity or to improve the loan conditions.

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Hodlinvestor@Hodlinvestor

Private schools are consumer debt.
Consumer debt is bad. 🤣
Pay off the loan. And invest the installment that's freed up.

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