Mortgage transfer

Mortgage transfer

It's been in the news regularly lately that the share of oversellers in the mortgage market is increasing. This is not surprising with today's low interest rates. However, there is more at play, and more and more people are coming to the conclusion that switching mortgages, despite the sometimes high penalty, is also interesting for them.

Mortgage interest deduction

For those who have to pay tax in the highest income tax bracket, there has been a restriction on interest deductions for several years. This year only 43% of the interest may be deducted, next year it will be 40% and the following year it will be equal to the tax rate in the^2nd and^3rd bracket, now 37.10%. It is also certainly not out of the question that mortgage interest deduction will be further limited or perhaps even abolished in subsequent years.

Paying penalty interest is actually nothing more than paying a lump sum for the interest that should still be paid in the coming years. In view of the limitation of the mortgage interest deduction in the coming years, it is therefore interesting from a tax point of view to deduct the high expensive interest, this year or next year, at the highest possible rate.

Example

To understand what this can mean, we have worked out an example.

Current mortgage €300,000 at an interest rate of 3.5% which is fixed for another 5 years and the penalty interest is €25,000.

The new mortgage of also €300,000 can be taken out with a new fixed rate at 1.40% for 20 years fixed.

The total charges over the next 5 years in the current situation come out net to €38,745.

In the new situation, the total monthly costs over 5 years are € 29,748 and that includes the € 25,000 penalty! This saves almost € 9,000 over a period of just 5 years.

And perhaps more importantly, the interest rate is fixed again, at a low level, for a period of 20 years. So there is less dependence on future interest rate trends.

Curious?

If, by reading this example, you are also curious about whether refinancing is interesting in your specific situation, please do not hesitate to contact me or one of my colleagues. You can do this on 020-691 0022, or via hypotheken@kuipersclaassen.nl.