The credit mortgage
What is a credit mortgage? A credit mortgage is the most flexible mortgage type that exists. You actually have a revolving credit with your home as collateral. Because of this security, the lender is prepared to use a lower variable interest rate than with a normal revolving credit. However, the interest is often higher than the mortgage interest rates for other mortgage types . That is why this form is often used as an alternative to a normal revolving credit (consumer) and much less as a form to finance a deductible part of the loan. In principle, you determine whether, when and how you want to repay the loan. You can even have the interest due up to the credit limit (a certain percentage of the value of your home). A condition is often that you also bring in quite a bit of your own money.
Tax related to the credit mortgage: Until 1997, the credit mortgage had an additional advantage. People could borrow money cheaply and deduct the interest on that amount through the tax. When the tax rules regarding consumer use of a mortgage loan were tightened from 1997 onwards, this type of mortgage has lost much of its appeal. Because since then, the mortgage interest on the credit mortgage was only deductible if the borrowed money was spent on renovations or the purchase of another home. And since the revision of the mortgage interest deduction in 2013, the credit mortgage is no longer interesting from a tax point of view. Because since 2013, the credit mortgage - even if the money was to be used for the purchase or improvement of their own home - is no longer allowed for starters. 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.
But the options with the credit mortgage are also limited for the previous homeowners. Increasing the existing mortgage with a credit mortgage is no longer permitted for tax purposes. Otherwise, they will also not have a mortgage interest deduction on the increase. This means that the credit mortgage is actually only interesting for the mortgage financing of consumer spending, such as a car, boat or second home.
Advantages of a credit mortgage:
- there is no repayment obligation;
- repaid amounts can easily be withdrawn;
- attractive interest rates compared to normal consumer credit forms;
- particularly suitable for the mortgage financing of consumer spending, where the mortgage interest is not deductible.
Disadvantages of a credit mortgage:
Overview of the most common mortgage types
- this type of mortgage is almost no longer offered;
- with most lenders the mortgage to be provided amounts to a maximum of about 80% of the value of the home (market value);
- the interest often cannot be fixed for longer periods;
- often (high) surcharges apply compared to the normal mortgage interest rates;
- the mortgage interest on newly concluded credit mortgages is no longer deductible from 2013.