June 25, 2021

MP Now News

Mortgage News

First time buyers are turning to interest-only mortgages

Photo: DutchNews.nl

According to new figures from the mortgage advisory group De Hypotheker, first-time buyers are increasingly opting for interest-only mortgages.

In the first quarter of this year, 14% more young homeowners opted for a partial or full interest mortgage, and the number has nearly doubled from two years ago, said De Hypotheker.

One in six young buyers now opts for the cheaper mortgage in order to reduce their monthly expenses. The popularity of the interest-only mortgage is due to the very low mortgage rate combined with the constantly rising property prices, ”said the commercial director Menno Luiten.

“With an interest-only mortgage, starters benefit less from the tax deduction, but the lower monthly payments clearly predominate – also due to the low interest rate.”

Luiten estimates First-time buyers with a mortgage of 350,000 euros can save 259 euros a month with a mortgage where they only pay back half of the main loan.

The banks have agreed that the pure interest component in mortgages may not amount to more than 50% of the property value.

Interest rate mortgages are not without risk, especially when the buyer is borrowing a lot of money relative to the value of the property. Buyers also need to make provisions for principal repayments at the end of the loan term.

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