What is an investment mortgage

When you combine an interest-only mortgage and an investment account, you have an investment mortgage. At the end of the term, the loan is repaid with the value of the investments at that time.

As a result, the investment mortgage is characterized by the chance of a high return, although the risk of a disappointing return always remains present. The longer the duration, the higher the average return expectation. The investment of a mortgage investment can be done both through a one-time investment, but a periodic investment in securities is also possible.

What is an investment mortgage

What is an investment mortgage

There are quite a few benefits associated with an investment mortgage. For example, there are low net charges and there is much freedom in the interpretation of the investment. So you definitely have the option to choose what you invest and what you do not. In most cases it is possible to make an extra deposit or withdrawal.

In addition, the investment mortgage is also fiscally attractive because the interest deduction is maximum throughout the entire term. The gross and net charges also remain constant at constant interest rates. But the biggest advantage of an investment mortgage is perhaps the relatively high chance that you can get a high return.

The biggest disadvantage of the investment mortgage

The biggest disadvantage of the investment mortgage

Is perhaps that it is no longer interesting for starters and people who want to increase their mortgage. This is because, since 1 January 2019, mortgage interest relief in the Netherlands is only possible with a limited number of mortgages. Namely, the mortgage types for which the loan is already being repaid during the agreed term.

The investment mortgage is therefore not eligible because the loan is deducted from the return achieved at the end of the agreed term. As a result, the investment mortgage is only taken out in very specific cases. Other disadvantages of the investment mortgage is that the value of investments is taxed in Box III. The return is also not guaranteed, although the chance of a disappointing return is relatively small. As a result,

What is an investment mortgage

What is an investment mortgage

There are two types of mortgage in the Netherlands that fall under the term investment mortgage. First, there is the loan with investments in a capital insurance policy. Secondly, there is the loan with a pledged investment deposit or investment account.

Loan with investments in a capital insurance policy

The loan with investments in a capital insurance policy has a capital insurance policy in addition to the interest-free loan. The latter is in most cases a mixed life insurance policy. After all, it covers death and life. This capital insurance scheme saves money to enable repayment at the end of the term.

The term of the loan is usually around thirty years. Investments are usually made in securities. After the period has expired, the insurance is paid out and used to repay the loan. Payment is therefore not made during the term! The capital invested in the insurance is not immediately taken up by the borrower, but this capital is only paid out when the insurance is terminated.

Loan with pledged investment deposit or investment account

Just like the previous investment mortgage, this is a repayment-free loan. This means that the loan is only paid off at the end of the term. Unlike the previous investment mortgage, this is linked to a pledged securities deposit. In most cases, this securities deposit is an investment portfolio built up by the borrower himself.

However, it is also possible that an investment account is taken as a building. With this mortgage, a deed of pledge is signed in addition to the mortgage deed. After all, these binding agreements make it impossible for the borrower to obtain the invested capital.

Do you want access to the invested capital?

If you want to have access to the invested capital and therefore you want to enjoy a certain freedom, a special variant of the latter type of investment mortgage is possible. This is based on the assumption that the return on investments is so good that it can be partly used (in addition to saving for repayment) for paying the monthly charges.

In practice, this results in a considerably shorter repayment period than is the case with the life variant. An important consequence is that the expected return on investments is a lot lower than this is ‘let rest’ for a longer period. This variant of the investment mortgage is very risky. After all, the monthly burden of the borrower is directly dependent on the stock market prices. This can have disastrous consequences in some cases.


Leave a Reply

Your email address will not be published. Required fields are marked *