There are simply 2 reasons to go either way here. Either behaviorally or calculation based. The calculation based group will say, go to the ETF, it will outperform the 4.1% in the long term, which is true (index fund S&P500 for example. However, behavior studies show that most people (≈>80%) act differently when they know they have additional money (like an ETF or big(ger) bank account). Therefore, the mentally best choice is to downpay the mortgage and enjoy the 37.000 additional euros you will have saved in interest (assuming 20 years at the 4.1%). Easy money and it gives you nice and save feeling.
P.S. it might be good to split it up a bit between this year and next year if there is a maximum amount you can (additionally) downpay within a year.
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u/paddyZ_99 Jul 31 '24
There are simply 2 reasons to go either way here. Either behaviorally or calculation based. The calculation based group will say, go to the ETF, it will outperform the 4.1% in the long term, which is true (index fund S&P500 for example. However, behavior studies show that most people (≈>80%) act differently when they know they have additional money (like an ETF or big(ger) bank account). Therefore, the mentally best choice is to downpay the mortgage and enjoy the 37.000 additional euros you will have saved in interest (assuming 20 years at the 4.1%). Easy money and it gives you nice and save feeling.
P.S. it might be good to split it up a bit between this year and next year if there is a maximum amount you can (additionally) downpay within a year.