Whoever wants to buy a house, business premises or a piece of land will, in most cases, take out a mortgage for this. If we are honest with ourselves, it is clear that almost no one can save enough money to buy property without taking out a loan or mortgage. Most homeowners have taken out a mortgage to buy their home. This is not a strange thing in itself. Where we want it in this article are the different mortgage types. From investments to a loan with collateral: it is all possible.
The Netherlands has various types of mortgage that we will all discuss below. A mortgage for taking out a loan seems to have almost become a kind of automatism. Indeed, there is hardly any homeowner who does not have one. When we use the word automatism, we are very aware that we are talking about a decision that needs to be prepared very well. This is therefore not about futility or about something that can be decided quickly.
Transitional mortgage types
From January 1, 2013, the new mortgage law applies in the Netherlands. This means that a number of mortgage types will no longer be offered in our country from this date. In practice, this law mainly affects people who take out a new mortgage. These consumers will no longer be able to use a number of mortgage types. For those who still use a type of mortgage that was concluded before 31 December 2012, the transitional law applies. This means that the old legislation applies to these mortgages until 2044. The right to deduct the mortgage interest on the tax return also remains in force.
Choose mortgage type checklist
As you can read above, mortgage law has been thoroughly reformed in recent years. This means that it is no longer always possible to view the mortgage interest as a tax deduction. The time when mortgages were a good form of investment is also behind us. That is why it is important to list all types of mortgages and to see whether they can still be taken out as new mortgages.
An annuity mortgage is a form of mortgage in which the amount to be repaid for each term is composed in such a way that this amount consists of the sum of interest and the repayment per term. The share of interest is hereby equal to the amount of the repayment. The entire mortgage loan was paid off immediately at the end of the term. The amount that must always be paid at a fixed time was named annuity. This is one of the forms of mortgage that is not protected against an interest rate rise. This is important to know before you take out such a mortgage. On the other hand, it is still one of the mortgage types that remain tax deductible.
With a linear mortgage you pay off the same amount every month. This is one of the simplest forms of mortgage for consumers. This way you know clearly during the term of your mortgage what amount you should provide in your budget every month. As a result, the mortgage is becoming increasingly smaller and the interest rate continues to fall during the term of the mortgage. This mortgage also remains tax deductible. If you are thinking about buying a house, you may now take out this mortgage.
The savings mortgage was one of the types of mortgage that was common in the Netherlands. You could regard this type of mortgage as a type of investment. Furthermore, it is no longer possible to declare this mortgage on your tax return after the 2013 amendment of the law. This is no longer seen as a deductible item.
Bank savings mortgage
This is also one of the mortgage types where the law of 1 January 2013 made it possible to build up savings during the term of the mortgage. This mortgage was also favorable for tax purposes. This is still the case for existing mortgages. The capital that was built up in this way could be used to pay off the mortgage loan at the end of the term. At the same time, savings were built up and these mortgages could be considered as a type of investment.
This form of mortgage is not bound by a schedule for paying off the debt. On the other hand, the interest on this mortgage must be paid monthly. For the debt part itself, it is quite possible that this sum will only be paid at the end of the term of the mortgage. This may seem attractive, but you must bear in mind that if you sell your property for the term of the mortgage, you must be able to pay off the mortgage in one go.
Investments sound tempting. An investment mortgage, however, is one of the types of mortgage that can no longer be deducted for tax purposes from January 1, 2013. It is, moreover, a mortgage where capital is built up to be able to make repayments immediately at the end of the term. Those who bought a house before that date can have these types of mortgage run through. Buying a house now and taking out such a mortgage is no longer possible.
Savings investment mortgage
Just like the investment mortgage, this is a form of investment in combination with a mortgage loan. This type of mortgage is also no longer deductible since January 1, 2013. With this mortgage you have the choice whether you want to save or invest your monthly premium. This has advantages because during the term of this mortgage you can still switch between saving and investing.
Traditional life mortgage
With the life mortgage, when purchasing a house, the mortgage for taking out a loan is linked to a life insurance policy. This delivery insurance is taken out for the duration of the term of the mortgage. The delivery insurance is paid out at the end of the term of the mortgage or upon the death of who took out the mortgage. The advantage of this is that if you die before the end of the term, your heirs will have no debts. A disadvantage of this type of mortgage is that after January 1, 2013 it is no longer tax deductible.
The credit mortgage is a flexible form of mortgage. In fact, this mortgage can be compared with a revolving credit. If necessary, you can withdraw money during the term. This can be useful during the renovations. You should keep in mind that this is a form of collateralised loan. If you can no longer pay your loan, this means that you immediately risk losing your house.