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Financial Services CenterYour Mortgage Specialist in Holland - Expatriates Welcome! |
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Types of Mortgages
The ''One-Size-Fits-All-Mortgage'' does not exist. Matter of fact, there are hundreds of mortgage packages on the market, each with their own pros and cons. Which mortgage form will benefit you in the long run depends on your individual situation and wishes.
Regardless of which payment form you select, you always pay interest of the unpaid portion of the loan obtained.
Though there are hundreds of loan varieties, there are eight basic mortgage types. They differ primarily in the way the loan will be paid off.
The eight basic types of mortgage are:
 Fixed Rate Mortgage
Each month, you pay a fixed portion of the principal, plus interest over the unpaid portion of the loan.
Initially, your total monthly payments are high. But because the interest is calculated over the unpaid portion of the loan, expenses will progressively diminish during the life of the loan. Note: the smaller your interest payments, the smaller your tax advantage.
Annuity Mortgage
Assuming a steady interest rate, monthly gross payments remain equal over the life of the loan. Payments consist of principal plus interest.
At first, the interest will form the largest portion of the yearly payments. Gross payment remains constant, but the after-tax (net) amount increases over the life of the loan. This is due to the fact that with each payment, you pay more into the principal, and thus less interest over the unpaid portion. The result is a diminishing tax advantage.
Life Insurance Mortgage
You pay interest only. The final mortgage payments is made from a so-called 'mixed life insurance policy' issued by an insurance firm. The payment is made on the final due-date, or when the person insured has died.
Instead of traditional mortgage payments, you pay the monthly insurance premium. At the end of the policy term, the life insurance premium plus interest will pay off the mortgage loan.
One advantage of the life insurance mortgage is that at the end of the term the amount of premium plus interest may by higher than than actual mortgage loan. Also, should the buyer of the house die before the house is paid off, the partner will receive the insured amount from which the mortage can be paid.
As no mortgage payments are made during the life of the loan, the interest portion remains constant, calculated over the full amount due. As these interest payments are tax-deductible, you enjoy maximum tax credits during the life of the loan.
Savings Insurance Mortgage
The monthly payment consists of interest, a savings premium, and a life insurance risk premium.
This provides you with a high tax advantage. The income of the payment policy covers the mortgage loans on the due date (or, in case of death).
The interesting aspect of the savings insurance mortgage is that the bank pays interest over the savings premium (basically, your mortgage payments) equal to the calculated mortgage interest rate.
Each time the mortgage interest rate is adjusted, the savings premium will be adjusted as well in order to insurance payoff by the due date. As the mortgage interest is coupled to the savings premium, the premium will get lower when interest rates rise, and higher should interest rates fall.
Savings Account Mortgage
No payments are made during the life of the loan. Your one-time savings account deposit will take care of the mortgage payment on the due date.
Your deposit will gain interest. It also pays the premium for the life insurance risk policy. This results in a high tax advantage.
The bank pays an interest amount over your deposit equal to the mortgage interest rate.
Investment Insurance Mortgage
This mortgage loan is satisfied with the final dividend of the investment insurance policy.
The savings premiums are invested in stocks, bonds, or a combination of the two (unit linked).
The total amount of premiums depends on the course of the market value during the life of the mortgage. The advantage of this package is the possibility of a higher return than can be obtained with a traditional life insurance policy. In addition, this product is very flexible.
Investment Account Mortgage
Your one-time investment account deposit will take care of the mortgage payment on the due date. The total amount of premiums depends on the course of the market value during the life of the mortgage. Your deposit can be invested in stocks, bonds, mixed funds, or a combination.
Advantages: low monthly payments and optimum freedom to handle your own money.
Interest-Only Mortgage
You pay interest only. On the mortgage due-date, you pay off the entire loan (for example, from the sale of your home).
Interest-only mortgages are only granted if there is sufficient over-value in the collateral (usually the home).
Often, this loan is used as a second mortgage (e.g. to finance renovation).
Need a custom quote? Call FDC's mortgage-advisory service: 020 - 470 0300 (country code: 31), or use our online quote service.
With over 25 years of experiences, FDC is your mortgage specialist in Holland (The Netherlands). We welcome inquiries from expat services, expatriates and Dutch nationals alike.
This site provides basic information about the services of Financieel DienstenCentrum (Financial Services Center). However, no rights can be derived from the texts on this site.
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