Perhaps you closed your mortgage a few years ago for a ‘high’ interest rate compared to the current interest rates. How can you profit from the current low mortgage interest rates? It is possible to ask your bank to ‘moderate’ the interest rate, in Dutch this is called ‘rentemiddeling‘.
Also, you can refinance your complete mortgage. Perhaps you have expensive life insurances connected to your mortgage so by refinancing you can fresh up your mortgage and save money by having a more profitable mortgage type.
Mortgage advice visit at home
We can help you by researching the best solution for you. We work nationwide and can visit you at home or at the office on a time that fits you best, also during the evening hours.
Different mortgage types
The mortgage type that suits your situation best depends on your personal circumstances and lifestyle. Banks offer a large variety of different mortgage types, but there are three basic models. When taking out a loan, eventually you have to repay the actual loan, plus in the meantime, you also pay the interest. In some mortgage models, you start repayment of the actual capital from the outset, usually over a long period, say 30 years, whilst also paying interest on the loan. In some other mortgage types, you postpone the repayment portion of the loan, solely paying the interest on it on a regular basis.
There are two capital repayment models: the annuities mortgage and the so-called linear mortgage.
With an annuities mortgage, you repay the capital plus interest. The characteristic of an annuities mortgage is that in early years you pay a lot of interest and you repay little capital. Towards the end of the mortgage term, this turns the other way round, paying off more capital and hence less interest.
Another characteristic is that with an annuities mortgage you make fixed monthly payments during the mortgage term. (Except of course that the payments may be affected by changes in mortgage interest rates).
Due to the redemption (ie the paying-off of the mortgage), the mortgage debt decreases and you pay less and less interest as time goes on. This means, however, that your net housing costs will increase a little since only the interest on the loan is tax deductible (for those of you who are taxpayers in the Netherlands). In the early years of the mortgage term the annuities mortgage results in lower monthly payment than a linear mortgage.
The linear mortgage, you start to repay the mortgage loan by a fixed amount every month. On top of this, you pay interest, but the interest payments will reduce over time since you are gradually redeeming the mortgage loan. Since the mortgage amount will actually decrease, so will your interest payments.
A linear mortgage can be useful for people who wish to repay their mortgage as quickly as possible and who are expecting a decrease in income sometime in the future. However, monthly mortgage payments are relatively high in the beginning.
If you are a taxpayer, this is not an ideal mortgage model either, since you will not be taking full advantage of the tax deductibility of mortgage interest.
Interest only mortgage
The interest only mortgage. There are circumstances whereby the bank will actually allow you to just pay interest and repay the capital from savings or investment accounts, giving their name to various different mortgages types linked to an interest-only loan:
Life insurance mortgage (levenhypotheek): This mortgage is connected to life insurance. The client pays a monthly or an annual premium, which is often invested in a mutual fund. The premium can include life insurance cover. This policy can be tax-free under certain conditions (rather than being taxed in box III at 1,2%).
Guaranteed life insurance mortgage
Guaranteed life insurance mortgage (spaarhypotheek): This mortgage type is also connected to a life insurance, but with a guaranteed return. The interest you get on your premium is equal to the interest you pay, hence you are 100% sure that your mortgage will be repaid at the end of the mortgage term.
A combination of these two, the hybrid mortgage (hybride hypotheek): With this type, you can switch from a mutual fund with investment risk to a guaranteed return on your money.
Investment account mortgage
Investment account mortgage (beleggingshypotheek): In an investment account mortgage you invest a certain premium into a stock market account (not an insurance!). This premium can be a lump sum, a monthly or an annual premium.
Guaranteed Savings Account mortgage
Guaranteed Savings Account mortgage (bankspaarhypotheek): This type of mortgage offers a high level of security. With a bankspaarhypotheek you will save money at a fixed rate. This rate is equal to the mortgage interest rate, and at the end of the term you will be sure that you have saved enough money to repay the mortgage loan.
Simultaneously you are optimizing your tax break since you are keeping the interest payments constant at their original level. It is also possible to invest rather than save in a bankspaar account, however, there is always some risk involved when investing rather than saving in cash.
More information about refinancing your current mortgage
For more information about refinancing your current mortgage or general information about mortgages please use the form below. Cournot Adviseurs is paid by the client and we do not receive any commission (provisie) from banks or insurance companies. We charge you fixed fees which are in most cases tax deductible.
The exact amount of fee we explain you during a first meeting and depends on what services you wish to use.[contact-form-7 id=”4826″ title=”Standaard formulier Engels”]