Even though it is no longer possible to take out interest-only mortgages in the Netherlands, it is important to be aware of some misunderstandings / fables regarding the interest-only mortgage.
Did you take out an interest-only mortgage in the past? Then you will have to pay off the mortgage sooner or later. And that is something few homeowners think about. Below we will discuss 4 misunderstandings about the interest-only mortgage.
You never have to pay off an interest-only mortgage … or do you?
A very big misunderstanding is that many consumers with an interest-only mortgage form think that they never have to pay it off. That is indeed what the name suggests, but this is definitely incorrect. Because an interest-only mortgage also has a limited or maximum term. Suppose you took out this mortgage 15 years ago for a period of 20 years, then you must start paying off in 5 years.
After all, you only pay interest up to that period. A residual debt remains. You can pay the remaining debt by selling your home or taking out a new mortgage. In that case, you borrow money on the conditions that currently apply. In 2017 you can only borrow 101% of the home value. And you can no longer apply interest deduction. Your fixed costs go up considerably when taking out a new mortgage!
A cheaper mortgage than the interest-only mortgage does not exist
This too is nonsense and a great fable. The monthly charges are of course very low because you can benefit from the interest deduction and you do not have to pay off during the term. But once the term has expired, the costs will go up considerably.
You may apply the interest deduction for a maximum of 30 years. We advise people with an interest-only mortgage to start paying off their remaining debt.
This is repayment-free when taking out a new mortgage
This is partly true. Only the people who took out this type of mortgage for 2013 can use the so-called ‘transitional law’. This means that they can retain an interest-only mortgage when they are transferred, but they must then be taken out in accordance with the new mortgage standards.
Overvalue on property so no risk
Even if you have a lot of surplus value on your home, an interest-only mortgage can still be a risk for you in the future. If you take out a new mortgage in the long run, your income will also be included in the calculation of a maximum mortgage.
They also pay attention to age and the standards for borrowing have of course become much stricter.