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My girlfriend and I are thinking about buying a flat. Paying mortgage rate close to what we pay for renting would take us 15 years to pay 250,000. Right now we're paying 1600 a month for renting a flat. We also pay for media but we could only choose ISP so we don't have option for different plans for water or electricity.

Now, the plan is to pay for three years 2000 while putting 1000 in a saving account. For the sake of this question, let's assume that it's a "sock", so no interest.

After three years we expect change in our income. Probably for worse as my gf's contract will come to an end. She still will have full-time job but all extras will be gone. We still be able to pay the mortgage rate without a problem.

The question: what's better to do after those 3 years? Use the extra 36,000 to refinance the mortgage and lower payments (while still maintaining the 15y plan) or keep the money as extra extra cushion?

Let's assume that 12 years bond have the best rate of 3,20% while saving accounts are 1,5%. Interest rate on the loan if 5,88%

MY pros if refinanced:

  1. lowering rate will let me save money for next 12 years.
  2. It will also make renting it more attractive as we will be able to calculate mortgage into rent.

MY con if refinanced: not being able to invest and use those 36k. So any task that would require that amount of money would need to be financed through loan.

  • Please clarify what you mean by the second sentence: "* Paying mortgage rate close to what we pay for leasing would take us 15 years to pay 250,000.*" – RonJohn Feb 23 '18 at 11:31
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    I would do everything to get the property paid-off. For emergency buffer, you can always just take out equity. – Fattie Feb 23 '18 at 11:46
  • @RonJohn Paying the amount of money we pay for rent would stack up to 250k in 15 years. – SZCZERZO KŁY Feb 23 '18 at 12:19
  • I'm with @Fattie on this one. It likely would be hard to get a return higher than the mortgage rate without taking on some element of risk. Furthermore, some amount of the mortgage interest may be tax deductible, making it even harder to beat with investments. – TTT Feb 23 '18 at 20:17

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