Mortgages are loans with which you can buy a home. The home serves as collateral for the loan. The way you pay back the mortgage depends on the type of mortgage you sign. There are various types of mortgages.
Different Types of Mortgages
You repay the same amount of money every month if you take out an annuity mortgage. The amount consists of two parts: interest and redemption. The more you repay, the more the loan decreases. That’s why the interest rate portion becomes smaller and the redemption element larger. An annuity mortgage is often chosen if income is likely to rise: a so-called career mortgage.
You pay a fixed redemption every month plus the interest over the loan if you take out a linear mortgage. Your debt declines every month whereby the interest on your loan decreases correspondingly. You tax benefit is reduced with this product as the benefit depends on the interest you pay. A linear mortgage is less expensive than an annuity.
You don’t repay any of your mortgage if you get an interest-only mortgage. You only pay interest every month over the loan. A mortgage can also be partially interest-only by combining it with another kind of mortgage. If you decide to take out a new interest-only mortgage then you are not eligiable for home mortgage interest reduction. This is since 2013.
Since 1 August 2011 you are not able to have a mortgage that is more then 50% interest free. In this way, the government wants to protext consumers from excessive debt. The new regulations are only valid for newly-agreed mortgages.
This is a flexibile form of a mortgage. Just like a normal bank account, you can withdraw and deposit money. You pay interest every month over the amount that you have withdrawn. The amount that you can withdraw depends on the value of the home. If you choose for this type of mortgage you are not eligibile for mortgage interest rate reduction.
This is a mortgage loan where the capital is intended to be repaid at the end of the term. Every month, money is set aside through an investment insurance or an investment account. You pay a premium every month. You pay for life insurance with a portion of this premium as well as the costs of the mortgage. You build portfolio investment assests with another part of the premium. If you take out a new endowment mortgage then since 2013 you are not entitled to mortgage interest rate reduction.
Traditional endowment mortgages consists of a loan for purchasing the house and taking out life insurance. You pay interest over the total amount of the loan every month. You make no payments during the term and repay the entire loan at the end of the term with the life insurance. If you plan to take out an edowment mortgage then since 2013 you are no longer entiteld to home mortgage interest reduction.
A savings deposit mortgage obliges you to pay only the interest of the loan every month. You don’t repay any of the capital. At the end of the term you repay the loan in its entirety in one go. The ensure that you have saved enough to repay the loan, you take out a savings insurance policy with which you save a sum of money each month. If your planning to take out a savings deposit mortgage you are since 2013 not eligible for home mortgage interest reduction.
This type of mortgage is also known as a hybrid mortgage and is a combination of a savings mortgage and an endowment. You can save or invest in order to repay the loan. During the term of the mortgage you can switch between saving and investing. When the interest rate is low you may choose to invest, if you anticipate a less favourable investment climate then you can choose to save. If you are planning to take out a new savings investment mortgage then you are since 2013 not eligable for home mortgage interest reduction.
Costs to arrange a mortgage are as follows:
Purchasing a home €1.700 (advice costs include €650)
Purchasing a new home as an expat €2.900 (advice costs include €1.650)
Remortgage €1.900 (advice costs include €650)
Mortgage related to divorce €3.500 (advice costs include €2.000)
Mortgage as an entrepreneur €3.500 (advice costs include €2.000)