Mortgage types When you buy a house, you will often have to take out a loan to finance the house. This loan is called a mortgage loan or a mortgage for short. A mortgage often consists not only of a loan but also of other financial products such as life insurance (term insurance ) and a savings or investment account. The total construction to finance a home is often referred to as the mortgage type.
Nowadays you can choose from a large number of mortgage types (mortgage types). The mortgage types differ mainly on the basis of how the repayment of the mortgage loan is arranged. There are various options for this. We have listed these options below.
Compare the mortgage interest rates of all mortgage types directly
Repay during the term of the mortgage You repay an amount on your mortgage monthly or annually. You thus reduce the amount of the mortgage and in this way you build up equity in your home. You can make periodic repayments with the following mortgage types: Since 2013, for starting home buyers and for mortgage increases, the mortgage interest is only deductible if they pay off the entire mortgage in a maximum period of 30 years. The annuity mortgage and the linear mortgage are the only types of mortgage that are repaid in the interim. These mortgage types are therefore the only suitable mortgage types for starters and people who increase their mortgage (eg moving on or renovating) in order to qualify for mortgage interest relief.
Repay at the end of the term of the mortgage You maintain the entire loan during the term of the mortgage. You build up capital within a capital sum insurance policy or in a savings or investment account with which you pay off (part of) your mortgage at the end of the term. This building up of capital can be done in many different ways. The final (net) proceeds depend on the amounts deposited, the returns that are achieved and the taxation. You can repay at the end of the term for the following mortgage types: Mortgage types in which the entire mortgage is repaid at once at the end of the term (such as the aforementioned (bank) savings mortgage and the life and investment mortgage) are no longer permitted for starting buyers from 2013. If they choose to do so, they do not have a mortgage interest deduction. That is why types of mortgage that are repaid at the end of the term are only interesting for homeowners who bought before 2013.
Do not repay With this option you take out an interest-only mortgage . This is a type of mortgage in which you do not pay off during the term of the mortgage and do not accrue an amount to repay the loan at the end of the term. The loan therefore continues to exist in full. This means that you will have to sell your house at the end of the term of the loan in order to pay off the mortgage. However, you can also choose to renew the mortgage. Since the tax benefit of the mortgage interest deduction is currently limited to a period of 30 years, this can result in an increase in the net monthly costs . Sometimes this tax disadvantage is not too bad in practice. This is partly due to the inflation effect. This effect means that the mortgage debt in 30 years is still just as high in absolute terms, but emotionally much lower. A $ 100,000 mortgage was a huge exception 30 years ago. Today the average is already more than double.
If the mortgage amount is high in relation to the value of the home, a fully interest-only mortgage is not possible. The lender does not want to run any risks and always have the certainty that the full amount can be repaid in any situation. Part interest-only is often possible. The interest-only form is therefore often combined with a form that does repay or build up capital.
The interest-only mortgage is also no longer permitted for starting buyers from 2013. If they choose to do so, they do not have mortgage interest relief. That is why the interest-only mortgage is only interesting for homeowners who bought before 2013.
Pay off when convenient A number of lenders offer a credit mortgage . This means that you have a revolving credit with your home as collateral. You can decide for yourself whether and when you make repayments. This makes the credit mortgage the most flexible mortgage type that exists. However, this product is offered by fewer and fewer lenders and often a substantial surcharge applies to the standard interest rates offered. Just like the interest-only mortgage, the credit mortgage is no longer permitted for starting buyers from 2013. If they choose to do so, they do not have a mortgage interest deduction. That is why the credit mortgage is only of interest to homeowners who bought before 2013.