What is a Savings Mortgage?
The savings mortgage consists of a loan and a linked policy. This can be a life insurance policy, but also a savings policy. The interest you receive on the policy is equal to the interest you pay on the policy. The more interest you receive on the one hand, the more interest you have to pay on the other hand. Due to the mortgage interest deduction in the Netherlands, it is favorable because you can largely deduct the interest paid.
The amount you save in the life insurance is equal to your loan. With this, you pay off your loan in one go at the end of the term. With the built-in death risk coverage, there is a payment after the death of you or your partner. With this, the surviving dependant pays off the mortgage in part or in full. The amount of your mortgage debt before 2013 is important for the extent to which you can deduct the mortgage interest from your income tax.
Benefits of a savings mortgage
- Maximum tax deduction
- In guaranteed capital, target capital is
- Care for survivors (through life insurance)
Disadvantages of a savings mortgage
The problem we often see is that when the fixed interest period expires on the mortgage part, a lower interest can be paid on the loan part, but there is also less return on the policy. As a result, the monthly deposit has to increase, which takes away the advantage of the interest rate reduction.
- High cost linked ORV
- High cost policy
- No interim repayment, resulting in LTV adjustment