Special repayment or ETF: which one pays off?

Short answer: Repaying part of your mortgage early (Sondertilgung) earns a guaranteed, tax-free "return" equal to your interest rate (Sollzins). An ETF can earn more, but the return is uncertain and taxed. In the example below, an ETF needs about 4.6 % a year before tax to match a 3.9 % mortgage. Whether it delivers that is not known in advance.

In short

• Every euro of Sondertilgung saves interest at your Sollzins, risk-free, with no tax on the saving.
• An ETF's return must be compared after tax and after risk. Capital gains tax (Abgeltungsteuer) of 25 % plus 5.5 % solidarity surcharge is 26.375 %. For equity funds, 30 % of gains are exempt (Teilfreistellung), which brings the effective rate to about 18.5 %.
• The break-even depends mostly on your Sollzins: about 3.6 % gross ETF return at a 3 % mortgage, about 4.6 % at 3.9 %, about 5.9 % at 5 %.
• Money paid as Sondertilgung cannot be taken back. Money in an ETF can be sold, at whatever price the market gives you that day.

Why is this comparison hard?

The two options look similar ("I have €20,000, where does it work harder?") but are different kinds of things. Sondertilgung is a certain saving. An ETF is an uncertain return. Comparing a guaranteed 3.9 % with an assumed 7 % a year that can swing sharply in a bad year is not an apples-to-apples comparison, and anyone who tells you the answer is obvious has skipped a step.

What you can do is make the numbers visible. That is what the rest of this article does.

How much does Sondertilgung save?

Take a €350,000 loan at 3.9 % Sollzins, with €5,000 of special repayment every year. The effect depends strongly on the initial repayment rate (Tilgung), because a slowly amortising loan has more balance for the extra payment to work on:

Own calculation: payment fixed at the initial rate, special repayment applied at the end of each year, interest rate constant for the whole term.

Reading the table: the lower your regular repayment, the more a Sondertilgung changes. Many articles quote a single figure without stating the repayment rate. A number without that assumption cannot be checked.

What does an ETF need to earn to beat it?

Take a €20,000 lump sum and 10 years. Compare:

• Sondertilgung at your Sollzins, assuming the interest you save is effectively reinvested at the same rate.
• ETF with a constant annual return, sold after 10 years, with tax on the gain.

Example in one sentence: with €20,000 and a 3.9 % mortgage, repaying is worth about €29,321 after 10 years. An ETF that earns a steady 5 % a year ends at about €30,256 after tax, one that earns 4 % at about €27,832.

Tax assumptions: Abgeltungsteuer 25 % (§ 32d EStG) plus 5.5 % Solidaritätszuschlag (§ 4 SolzG 1995) = 26.375 %; 30 % Teilfreistellung for equity funds (§ 20 Abs. 1 InvStG). Not included: the annual advance tax (Vorabpauschale), church tax, the saver's allowance (Sparer-Pauschbetrag, €1,000 or €2,000 jointly, § 20 Abs. 9 EStG) and fund costs.

Turn the table around and ask what gross ETF return you need:

The break-even sits only about 0.6 to 0.9 percentage points above the Sollzins, because 30 % of ETF gains are tax-free and tax is due only when you sell. Simplified comparisons often miss that. But a break-even is not a prediction. A broad equity ETF can also lose a large part of its value within months, and the table assumes the return arrives smoothly. Real returns do not.

What else belongs in the decision?

• Liquidity. A Sondertilgung is final. If your roof leaks next year or income drops, the repaid money is gone and the credit line is not automatically back. ETF units can be sold, at the market price of that day.
• Contract limits. Many lenders let you make a Sondertilgung once a year, up to 5 % and sometimes up to 10 % of the original loan amount (Verbraucherzentrale, as of 19 November 2025). Check your own contract for the limit. For a fixed-rate property loan, early repayment during the fixed period is only allowed with a legitimate interest (§ 500 Abs. 2 BGB). A Sondertilgung right in the contract is what makes regular extra payments possible. If you do leave early, the lender may claim a Vorfälligkeitsentschädigung (§ 502 BGB), see Leaving a loan early.
• Rate fixation. The 3.9 % in the examples only holds while the Sollzins is fixed. After the fixed period the rate on the remaining balance may be higher or lower, see What happens when the fixed rate ends.
• Behaviour. A prepayment plan runs on autopilot. An ETF position has to be held through downturns. Some people do one more reliably than the other.
• Rented property. If the property is rented out, interest may be deductible from rental income. That changes the comparison and belongs with a tax adviser.

All calculations are for information only and are not financial or tax advice. Check your contract and tax situation with a qualified adviser.

The information in this article is for general information only and is not financial advice. Interest rates and terms depend on your personal situation and change over time. For a personalised offer or interest rate, speak to your bank or your financial adviser. Returns of ETFs are not guaranteed. For tax questions, speak to a tax adviser.

Test it with your numbers in Hypomeister

The tables above use example values. In Hypomeister you enter your own loan, set a yearly Sondertilgung goal (Sondertilgungs-Ziel) and see the interest it saves and how much sooner the loan ends, before you decide.

→ Open Hypomeister · How special repayments work · Glossary: Sondertilgung

Sources

• § 32d EStG, § 20 EStG, § 4 SolzG 1995, § 2 InvStG, § 20 InvStG, § 500 BGB, § 502 BGB, all checked against the statute text 2026-11-07
• Sondertilgung limits: Verbraucherzentrale, "Baufinanzierung vorzeitig ablösen: Ohne Extrakosten aus dem Baukredit", as of 19 November 2025, read 2026-11-07
• Own calculations: Sondertilgung table, 10-year comparison and break-even (recomputed 2026-11-07)
• Cover image: AI-generated