It pays to save money during a loan term

It often takes many years to repay a home loan, so it therefore pays to start investing in a fund while repaying the loan.

If you regularly invest in mutual funds while repaying your home loan, you’ll have a home of your own and fund investments once the loan is paid off. You can also extend your loan term and keep your monthly expenses unchanged while investing in a mutual fund. See the examples of monthly investment during the loan term and after loan repayment. Which way would you choose?

Monthly investment during the loan term or after the loan has been paid off

See the examples of monthly investment in a fund during the loan term and after loan repayment. In both examples, the monthly expenses are 1,300 euros per month in total. Which way would you choose? 

Monthly investment during the loan term

Home loan
Loan: €200,000
Interest rate: 5%
Loan term: 25 years
Instalment: €1,148

Investing in mutual funds
Monthly investment: €152
Expected return: 6.5%
Investment period: 25 years
Amount saved: €45,600
Income: €61,811
Total: €107,411

Monthly investment after the loan has been paid off

Home loan
Loan: €200,000
Interest rate: 5%
Loan term: 20 years
Instalment: €1,300

Investing in mutual funds
Monthly investment: €1,300
Expected return: 6.5%
Investment period: 5 years
Amount saved: €78,00
Income: €10,821
Total: €88,821

 

5 tips for mutual fund investing during the loan term 

1. Pay down your home loan and invest in a fund at the same time. Secure your future by making fund investments as you repay your loan.

2. Keep your monthly expenses unchanged by extending the loan term and by investing the money freed up in a mutual fund.

3. You can make changes to the loan term during its term.

4. By investing monthly in the fund, you’ll utilise the compound interest effect and diversify investments in terms of time too.

5. Select a monthly investment amount that suits you financially. The ideal investment amount can be 10 per cent of the net profit, but you can get started just by investing ten euros a month. If necessary, you can easily change the investment amount, put investing on hold or redeem your investments. 

 

Remember that investment always involves risks. The value of investments can rise and fall, and an investor can lose part or all of the money they invest. OP Fund Management Company Ltd manages OP funds, with OP Asset Management Ltd as the portfolio manager. 

Please note that the calculation is indicative only. It has been calculated with a 4.116% reference interest rate (12-month Euribor on 16 August 2023) and a margin of 0.7%. You will receive a more accurate calculation of loan costs when you request a loan offer from us. The loan offer is free of charge and does not obligate you in any way.

See how your investments can grow – try out the savings calculator