Interest rates have fallen since the Muster family bought their house ten years ago. In the current environment, it would be possible for the couple to take out follow-up financing at very favorable conditions. The annual interest burden would decrease. If interest rates were to change fundamentally, Claudia and Peter Muster would have to reconsider their amortization strategy.
The fact that the couple has freely available funds gives them a high degree of flexibility. Perhaps there are good reasons for investing in stocks, other securities or in private retirement provision over the long term, for example. And don’t forget that homeowners are often well advised to invest in a financial cushion. If major renovations are needed one day, such as a new heating system, these can easily be financed from this reserve. These would all be valid arguments for not paying off more than is required.
But the amortization of a mortgage has also demonstrated its value, literally: anyone who pays off their debts then owns a larger part of the house. And if the value of real estate should ever fall, amortization is also an advantage. Financing a lower proportion of the lending amount with borrowed capital means increased financial security for the owner and borrower later on.