The investment mortgage is best recognized by the fact that a certain sum is built up over the term through an investment insurance policy. Maatwerk-hypotheek tells you everything about the investment mortgage.
Investment mortgage: what exactly is it?
The investment mortgage is one of the mortgage types that falls under interest-only mortgages. This means that with an investment mortgage, you do not repay the mortgage debt during the term of the mortgage. Instead, an amount is built up by means of an investment insurance policy. This amount can be used to repay the mortgage at the end of the term. With a high return, not much needs to be contributed monthly, allowing monthly payments to be kept as low as possible. However, in the event of a disappointing return, more must be contributed to ensure that sufficient capital has been built up at the end of the term to fully repay the mortgage debt.
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Besides the calculation you will receive immediately, you will also receive a E-book In addition to the calculation you will receive immediately, we will also send you an E-book detailing everything you need to gather to take out a mortgage.
The monthly payments for the investment mortgage consist of two parts.
The monthly costs you face with an investment mortgage consist of two parts. Firstly, there is the interest component. This is the interest you pay on the outstanding mortgage debt, which remains constant for the duration of the entire term. The second part is the investment component. This is the portion you contribute to the investment insurance policy. Therefore, in the event of a high return, this contribution component to the investment policy is low. If the return on investments is expected to be higher than the return on a savings account, the investment mortgage is a more advantageous choice than a savings mortgage.
Investment mortgage benefits
The investment mortgage offers several advantages over other types of mortgages. You can count on the following benefits, among others:
- A securities depository / investment account is used.
- Assets are built up over the term.
- With a high return, the monthly investment is low.
- The investment mortgage includes term life insurance as standard.
Disadvantages of investment mortgages
Of course, there are also some disadvantages to the investment mortgage, and these certainly should not be overlooked. There are various important disadvantages, such as:
- It is not guaranteed that you will build up sufficient capital for full repayment of your investment mortgage.
- In the event of a low return, the monthly deposit increases.
- New investment mortgages may not be taken out (abolished since 2013)
- The financial risks are relatively high
Redeeming or paying out an investment mortgage
Previously, it was virtually impossible to choose to cash out or surrender an investment mortgage without financial loss. Substantial penalties were imposed by the tax authorities for extra repayments and in the event of a cash-out. This rule was abolished as of April 2017, making it now more advantageous and simpler to make extra repayments on the investment mortgage. Until April 2017, there was also a rule requiring the investment mortgage to remain untouched for at least 15 or 20 years. This rule has also been dropped, making refinancing an investment mortgage easier. However, this does not mean that it is a financially smart choice. Maatwerk-Hypotheek would be happy to advise you.
Converting an investment mortgage
Converting your investment mortgage is possible in practice, but here too, it is not always advisable. In certain cases, it is financially more advantageous to make extra repayments on the mortgage than to convert it. Due to disappointing returns, resulting in high monthly contributions, many people wish to convert their investment mortgage. In this case, you will incur several costs. If the fixed-rate period has not yet expired, you may also have to pay a substantial amount in penalty interest. Maatwerk-Hypotheek can calculate for you whether it is financially beneficial to convert your investment mortgage. We can also assess which type of mortgage would be best suited for conversion.
Converting an investment mortgage into a savings mortgage
There are people with an investment mortgage who wish to convert this mortgage into a savings mortgage. It is important to know that the return on savings is often lower than the return on investments. On the other hand, with a savings mortgage, you can save at an interest rate equal to the mortgage interest you pay. While the risk of the investment mortgage can be mitigated by converting it to a savings mortgage, this conversion does not always yield benefits. Furthermore, it is not always possible. Maatwerk-Hypotheek would be happy to review your options.
Converting an investment mortgage to reduce the risks
Do you want to convert your investment mortgage to minimize the risks as much as possible? In general, it is a better option to convert the mortgage into a linear or an annuity mortgage. With these two types of mortgages, you start paying off the mortgage debt from the very beginning, significantly reducing the risk of residual debt. However, your monthly payments will increase, as you have to pay both an interest portion and a principal repayment portion each month. Because you start paying off the mortgage immediately with one of these two types, the risk of your home becoming underwater is much smaller.
Refinancing an investment mortgage involves costs.
Surrendering or refinancing an investment mortgage is possible, but in certain cases, it entails considerably high costs. In this instance, it can be described as a usurious policy. The policy is terminated, and any costs not yet charged will be deducted in a single lump sum. This is subsequently offset against the policy value. The mortgage lender charges fees, which are often high, meaning you only receive the remaining value of the policy. Consequently, the surrender value is significantly lower than the sum of the premiums you have paid and any potential return. Financially, this can therefore be significantly disadvantageous. Naturally, Maatwerk-Hypotheek can advise you.
Making the investment mortgage premium-free
If you were to surrender the investment mortgage, an amount would remain. Is this amount relatively small? Then you can use an investment insurance policy, or life insurance, to build up sufficient capital to repay the mortgage debt at the end of the term. In certain cases, it is possible to make this investment insurance policy completely premium-free. This means that you do not have the value of the policy paid out, but you also stop making new contributions. In this way, you can still allow the policy to generate returns until the moment the amount is paid out.
Save yourself to pay off the investment mortgage
The investment mortgage is a type of interest-only mortgage. This means that the mortgage debt only needs to be repaid at the end of the term. When you surrender the investment mortgage, it is up to you to find an alternative solution for capital accumulation. After all, it is important that you have built up sufficient capital at the end of the mortgage term to repay the mortgage. It is not always possible to take out a new mortgage for the same amount. You are, after all, older and perhaps already retired. This reduces the maximum mortgage amount, which may force you to sell the property if you cannot secure a new mortgage for the required amount. There are several ways you can ensure the necessary capital accumulation yourself. Maatwerk-Hypotheek is happy to think along with you.
Refinancing the investment mortgage
Many people want to switch their investment mortgage to another type to limit the risks. For example, many people want to switch their investment mortgage to a bank savings mortgage. In this case, it is important to know that the guaranteed final amount may not exceed the amount of the original deposit for the investment mortgage. Additionally, there are many people who want to switch their investment mortgage to an annuity mortgage or a linear mortgage. With these mortgage types, you are entitled to mortgage interest deduction. Furthermore, you start repaying the mortgage debt immediately. Maatwerk-Hypotheek is happy to advise you and review the best options for you together with you.
Take a fine into account
Are you planning to refinance your investment mortgage for financial benefit? Then do not forget that it is quite possible you will have to pay a penalty for the refinancing. This penalty can wipe out the financial benefit. The amount of the penalty is not fixed. This depends on several factors, such as the amount of the mortgage debt, the mortgage interest rate, and the remaining fixed-rate period. The longer the fixed-rate period is valid, the higher the penalty. The penalty you ultimately have to pay is, however, tax-deductible. Maatwerk-Hypotheek can, of course, tell you more about this.
Seek advice on the investment mortgage
Do you have an investment mortgage and would you like to know if refinancing is beneficial for you? Are you curious about the best steps to take regarding your investment mortgage? Maatwerk-Hypotheek is ready to assist you with independent mortgage advice. You can schedule an appointment immediately for professional advice on your investment mortgage. Click on the button “Request a free inventory consultation” below and leave your details so we can call or email you back. “Request a free inventory consultation” and leave your details so we can call or email you back.