An interest-only mortgage is becoming increasingly popular among first-time buyers. The number of young homebuyers who took out an interest-only mortgage in January, February and March of this year rose 14 percent compared to the same months last year, according to a De Hypotheker report. In fact, it has nearly doubled in the past two years. This increase is partly due to lower mortgage interest rates and home prices that continue to rise.
With an interest-only mortgage, you only pay the mortgage interest and pay off the loan in one payment on the due date. You can pay within the term, but you are not obligated to do so. Since January 1, 2013, only up to 50 percent of the total home value can be deducted without interest.
Beginners, including people between the ages of 25 and 35, benefit less from the mortgage interest deduction with this type of mortgage, but receive lower monthly payments in return. According to De Hypotheker, this is one of the reasons beginners choose this type. This involves saving hundreds of Euros net.
The interest-only mortgage is also increasing in popularity among other age groups. It is also popular among people between 45 and 55 years old, where a slight rise is observed. There was only a slight decrease between 35-45 years.
According to De Hypotheker, given the current low interest rates, an interest-only mortgage is an increasingly interesting alternative to a full-fledged mortgage that requires you to repay. However, De Hypotheker warns that first-time buyers often borrow a relatively large amount compared to the value of the home, while paying less quickly. If a home is suddenly sold, a larger mortgage debt remains. When the term ends, there must also be enough capital to be able to pay off, but this is not always obvious. In addition, the value of the home can go down and the mortgage interest rate can go up.
The government is not a fan of interest-only mortgages, as this means that the mortgage debt burden in the Netherlands will rise. In addition, the Dutch Financial Markets Authority warned earlier about the risks of the mortgage type. For nearly 80,000 people – because they cannot pay their premiums – forced deportation is at risk. In total, there are nearly 3 million interest-only mortgages in the Netherlands, AFM calculated at the beginning of this year.
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