The interest surcharges for an interest-only mortgage increase further. Is maintaining, renewing or renewing an interesting-only mortgage interesting?
Retain, renew or transfer interest-only mortgage
The surcharges that mortgage providers use for a new interest-only mortgage are increasing further. This makes an interest-only mortgage increasingly less interesting to take out in favor of the annuity and linear mortgage. Is maintaining, renewing or renewing an interest-only mortgage still interesting?
Why this extra surcharge with interest-only mortgage?
Mortgage lenders use this surcharge because there is no contractual repayment on the interest-only mortgage. The mortgage is only redeemed at the end of the term (often 30 years) by a new mortgage (refinancing) or the sale of the home. This is in contrast to an annuity and linear mortgage where part of the mortgage is paid back every month. Not repaying is seen by the bank as a risk.
The entire mortgage amount for the entire term
With an interest-only mortgage, the entire mortgage amount for the entire term will end up on the lender’s balance sheet. With the upcoming new standards, this will have a negative effect on the bank’s balance sheet. This standard stipulates that banks must maintain higher buffers in order to be less vulnerable to financial crises. Although this new standard will only take effect from 2022, the banks will probably have already incorporated this into the mortgage interest.
Does it make skipping interesting?
Due to this increasing interest rate difference, it may be interesting to make the switch to an annuity or linear mortgage at an approaching end of the fixed-rate period and thus benefit from the low mortgage interest rate. Do you have an interest-only mortgage and are you curious as to whether this is of interest to you? Request a free mortgage comparison and discover your options.