The mortgage is often the largest loan that you take out in your life. Interest must be paid on the loan amount , whatever form you choose.
This is a not inconsiderable expense for most homeowners. Unless you have an interest-only mortgage, you also receive an amount for repayment of the loan. Someone with a mortgage loan of 250,000 euros at an interest rate of 4 percent, pays an amount of 10,000 euros annually on interest alone. That is a gross amount, because the mortgage interest can be deducted from the tax, which means that the net costs are lower.
Conditions for mortgage interest relief
The tax authorities do impose conditions on homeowners to be able to deduct the mortgage interest. For example, the government has considerably tightened requirements. A new mortgage that has been taken out after 1 January 2013 is only eligible for interest deduction when it concerns a linear or annuity mortgage. With the other forms of mortgage, interest can therefore no longer be deducted. You immediately start paying off at the linear and the annuity mortgage. That gives you the certainty that at the end of the term you have paid off the entire loan amount and the house is all yours. Nevertheless, these types of mortgages are compared with the other, because the tax advantage of interest deduction is much lower.
After all, you pay less interest as the term progresses. With the savings mortgage, too, the entire amount is paid off at the end of the term of the loan, but you have a maximum tax benefit for the entire period. This is because you continue to pay interest on the entire loan amount. The tax authorities also set a limit to the period. For example, the interest may be deducted for a maximum of 30 years. Thereafter, the tax benefit expires, even if the mortgage has not yet been repaid. The deduction only applies to the home you live in, so not for holiday homes.
Old mortgage remains unchanged
A mortgage that has been taken out before 1 January 2013 does not change anything. If you buy another house for which you also need a mortgage, then the old mortgage can simply be taken away and even continued with another lender. But if you want to borrow more, you can only do so on the basis of an annuity or linear mortgage.
The fixed-rate period
When you take out the mortgage, you agree on which fixed-rate period you choose. This makes the costs for the coming years clear. If the period is shorter, the interest rate will generally be lower than if you record it for a longer period. Periods can vary from 5, 7 to 30 years. If the interest rate is fixed for a shorter period of time, you have to take into account that the interest may have risen after the end of that period. Especially if the interest rate determination dates from a time when the interest rate was very favorable. As a result, your monthly payments will rise. Securing for longer gives you the certainty that the part of the costs you pay in interest does not change during that time. So think carefully about the length of the interest period. That can save a lot of money.