Renting a home in our country is becoming increasingly unattractive. Landlords of social rental properties are currently bound by a certain income limit. If you earn more than a certain amount, you will no longer be eligible for a social rental home. In that case you have a choice of two things. You can choose to rent a house in the private sector. This means that you pay a rent to a private landlord for a property that actually provides you with no added value compared to a social rental property.
More and more people are choosing the other option. The choice is made to purchase an owner-occupied home. Most people do not just have the amount for the purchase of their own house in a drawer and therefore a mortgage must be chosen. Such a mortgage is a loan granted by a bank or other lender with your house as collateral. This collateral ensures that you can pay off your debt by selling your house when you can no longer pay your mortgage.
What types of mortgages do you have?
Mortgages come in many shapes and sizes. In fact, for every personal situation there is a form of mortgage that is attractive. If you like to go along with the stock market, then you can opt for the investment mortgage. In that case, the amount of the repayment that you make to your mortgage provider each month is invested in shares. Because of this, the amount that you build up can fluctuate quite a bit.
If the stock market is doing well, then you have built up a nice mortgage part against an attractive investment. However, if the stock market collapses, you still have the chance that this part of your built-up mortgage amount will be worth considerably less in one go.
You can also choose to save with your mortgage. In that case, you deposit an amount each month in a special bank savings account so that you can pay off an important part of your mortgage with this amount saved up at the end of the term. A bank savings mortgage is often chosen in combination with an interest-only mortgage, in which you only pay interest on the loan amount while at the end of the journey you pay off the mortgage with the sale of your house in combination with your bank savings balance.
The annuity mortgage
With the mortgage types that we just mentioned, you had quite a choice in terms of the amount that you pay in monthly repayment. The oldest type of mortgage is now being chosen more often. This is mainly because starters often have difficulties in the housing market. They would like to buy a home but may not have the monthly amount to pay the mortgage. In that case, more and more use is made of the annuity mortgage.
A mortgage based on annuity has a very special structure, making it easy for first-time buyers to join this system. You pay a fixed monthly amount in repayment and interest on the mortgage. In the first instance, for the most part your repayment consists of interest. After all, a fairly high amount is still outstanding and a lot of interest has to be paid on that.
Over time, the amount that is outstanding in mortgage debt will decrease, so that you have to pay less interest on the outstanding amount. After all, this has decreased. In that case you will automatically pay more on your mortgage.
The benefits of an annuity mortgage
Such a mortgage has a number of advantages that make it an attractive form of mortgage, especially for starters. First of all, there is the certainty. You have the assurance that you will have to pay a fixed monthly amount to the mortgage provider for the next 30 years. You can take this amount into account every month so that you will not be faced with any surprises. Your money is safer than with an investment mortgage because the repayment does not have the chance to ‘evaporate’.
In addition, it is enormously to your advantage that the government has a refund scheme for mortgage interest. You can enter this – for and in part – with your tax return, which means that you will be refunded to your bank account once a year, or in monthly installments. You can deduct this amount from your gross mortgage charges, leaving you with an amount of net mortgage charges.
If you pay a lot of interest, you will get this back. As a result, your net mortgage costs for a starter are attractively low. It is therefore nice that you do not have to pay much for your mortgage every month. With an annuity mortgage, home buyers are many times cheaper than renters in the social or private sector.
You do not have to worry that you will still have a piece of residual debt at the end of the repayment of your mortgage. If you continue to use such a mortgage, the final amount is guaranteed equal to the debt of your mortgage amount.
The disadvantages of such a mortgage
A mortgage based on annuity also has disadvantages. You only notice these disadvantages when you have been repaying for a while. If you have been repaying for around 20 years, you will find that your mortgage interest repayment continues to decrease. Your gross monthly charges will remain the same, but your net monthly charges will increase. The question is to what extent this is desired when it becomes more uncertain whether your financial situation will remain the same compared to the period in which you took out your mortgage.
Does your income decrease because, for example, you started working part-time in the meantime, or because you became partially unfit for work? In that case, the monthly repayment without the compensation of the mortgage interest refund becomes a monthly millstone around your neck.
If you have taken out an annuity-based mortgage on the basis of a fixed-interest term of less than 30 years, then you could still consult with a mortgage advisor to what extent it is possible and worthwhile to take out another type of mortgage with lower net mortgage charges. choose.