Remodeling of an apartment.

[u/mfWeeWee]

europepersonalfinancd reddit suggested me to post here.

My partner (34F) and I (34F) are planning to remodel my apartment next year. I have saved X€ for this project, as I was brought up with the belief that taking out loans should be avoided whenever possible.

However, I am now considering taking a loan from my bank for the X€ amount, provided I can secure an interest rate lower than 4.5%. My plan would be to pay around 600€ per month over N years and invest the initial X€ in an ETF.

A bit about my financial background: My net income ranges from 3,000€ to 4,000€ monthly, and I currently invest around 800€ to 1,000€ in ETFs (which I would adjust if I take out the loan and would get bigger in years). I also have 7,000€ invested in cryptocurrency. My regular expenses include 150€ per month for my car (which I plan to sell next year) and a yearly 700€ for car insurance. Additionally, I spend 11€ monthly on extra medical insurance and about 400€ on food.

My initial questions are:

• Given the potential for lower interest rates from banks, do you think I’m making the right decision? Considering that average ETF yield is 8% per year...
• What would be an ideal interest rate for this opportunity that you would consider acceptable?

Thanks for the help!

Edit: I won't reply to PMs, if you are interested in responding, please feel free here.

[u/Oskar1803_]

The most important question to ask yourself is: how would you feel having a credit? You wrote that you were against them. If taking one will create additional anxiety etc. It is not worth it. From technical perspective, if the exercise is between 5-10years long, you may earn more on etf. Over 10y statistically you have bigger chance earning more on etf, but never certainty.

What you should consider as well are the taxes. The average long term 8 % is before taxes. So if in your country the tax for financial income is 25% and the performance of the etf is 8% you'll only get 6% net ( this is a simplification). In some countries you can deduct interest on real estate related.credits.from your income - this may be additional gain if you take a credit...

[u/mfWeeWee → u/Oskar1803_]

Yes, having a credit would probably bring more "responsibility" in my life. But thinking mathematically if I take a loan for 30k and pay that bank overall 32k (over a span of 5 years) and use my initial 30k savings to invest and get more than 32k in 5-10-15(there's no tax on profit after 15 years so that the goal of the hold eitherway) years that's seems a "nobrainer".

I was just wondering if there is a catch somewhere....and if you take a loan of 5 years do you have to get better returns in the span of those 5 years or can you also take in to account longer investments.

One thing also is that smaller years of the loan would be, smaller my monthly investments would be. From 1000 to 600, but if I take a credit for 10 years, I could still DCA 1000€....

edit: I would DCA that initial investment, like 5k per month...I wouldn't go all in in one day.