Save and invest while repaying your home loan

Are you thinking about saving while repaying your home loan? See our answers to frequently asked questions!

What should I invest in?

If you want to save in the short term, a savings account is usually the best option. If, however, you don’t expect to use your savings for at least three years, you should consider investing in funds, for example: over the long term, they offer a better expected return than savings accounts. If you suddenly need your savings contrary to your expectations, it’s not difficult to get your money out of the funds quickly – it’s usually possible within a couple of days.

Funds are by no means the only investment option, but for budding investors they are a handy way to get familiar with investing: funds are managed by a professional and provide you with effortless diversification. If you already have experience from investing, want to take bigger risks and seek as high a return as possible, you should also consider equity investments.

How much money do I need to get started with fund investments?

It depends on how much money you have and what your circumstances are. For instance, you can start regular fund investments with as little as 10 euros a month. You can always make changes to the monthly amount if necessary.

Read more about funds

Should I buy or rent?

In the long run, home ownership has been more financially viable than renting a home even though the monthly expenses are usually a little higher. The homeowner is building their wealth by paying off their loan and expecting their home to increase in value.

Read more about the differences between owning and renting a home and look at calculations

How do the different repayment methods affect the monthly costs of a home loan?

The monthly payment always includes the instalment and interest in a certain proportion. 

If you choose equal payments (annuity), the monthly payment remains fixed throughout the loan period if there are no changes in the interest rate level. If interest rates rise, the monthly payment increases with them.

If you choose fixed equal payments, your monthly payment remains fixed throughout the loan period even if the interest rate level changes. With fixed equal payments, the loan period will be extended if interest rates rise.

If you choose equal instalments, the instalment is always the same, but the proportion of interest decreases as you pay off the loan. In this case, the monthly payment will decrease if there are no changes in the interest rate level.

Read more about the home loan repayment methods

Should you pay off your home loan as quickly as possible or invest some of your money?

There is no straightforward answer, but generally speaking, it’s a good idea to invest while you repay your home loan.

When you calculate how much you repay each month and how much you could invest, you should consider for how long you want to invest, how much you assume to earn on your investments and what the interest rate of your home loan is.

Both investments and the home loan interest rate level always have a degree of uncertainty related to them: the repayment period of home loans is typically long and accommodates many market and interest rate fluctuations. On average, if you’re willing to take some risk and want to invest your money for more than 10 years, investing is probably more profitable than repaying your home loan as quickly as possible. 

You can save and grow your wealth in many ways. When you amortise your home loan, you build your wealth, but alongside loan repayments, you should also consider ways to earn returns. The most important thing is to pay attention to your particular situation: do you have a large enough buffer for surprises in your daily life? Do you want to save for your retirement or are you dreaming of taking a sabbatical or another new step in your life?  Also consider what kind of a saver and investor you are: do you want a solution that is well-diversified and as easy as possible to manage? If yes, investing in funds could be a good option for you. Or do you want to manage your investments actively and trade in equities? If this is your preference, you might also be interested in a book-entry account or an equity savings account.