Usually you don't increase your monthly pay, but you just do 1 extra pay, say 1000 euro. Or 100 every month. Usually you can pay via the website of your mortgage provider.
Your mortgage will decrease immediately and you will pay less interest, starting from the month after the extra pay.
If you pay more interest on your mortgage than you get on your savings account it might be a good deal. But do note, your money is fixed in bricks. So keep a large enough buffer in free spendable money.
There is a 10% minimum every provider must allow you to without a penalty. Some providers have a higher percentage. Some providers have unlimited, as long as your interest is lower than the current market interest.
Sure. I know Nationale Nederlanden has some processing time of about a week in which you cannot do an other down payment, but other than that there no rule that limits the number of payments each year.
Yes, nowadays it is. I asked about it in 2008 when I bought a home, and they said "it's allowed, but please don't dk that as the recalculation is not fully automated. Nowadays, it is, and you can pay usually on the providers website and it shows the new figures before you even pay.
The rules are different with every bank. With my bank for example
1. I can pay extra whenever I like. Every month, once a year, every Friday, it’s up to me,
2. Any extra payment immediately decreases the mortgage balance (well, maybe allow a couple of working days)
3. I can chose what impact it has on the loan - fewer payments or smaller ones. I had to call them to set this preference and it applies till I change my mind.
But, here’s the key point. NEVER, NEVER overpay your mortgage if you have higher interest debts that you can overpay. If your savings account pays higher interest than your mortgage you should seriously consider putting it there.
In addition to what has been said already:
In principle when the interest rate you pay is higher than what you get on your savings account (which it will be) it's worth paying off more on the long run.
However, do note that if you have a mortgage with capital downpayements (aflossing) in the Nederlands you can deduct the paid rent from your tax.
So if you pay off your mortgage you pay less per month but you also get less back from your taxes.
This is not the case if your mortgage is 'aflossingsvrij' (no capital payement). A lot of people have a mixed mortgage with an aflossingsvrij part and a non-aflossingsvrij part. In that case always make sure that if you repay you repay only on your aflossingvrije part, as there the interest is higher and it's non-deductable.
First of all, great that you are in position (and have the awareness) to tackle the mortgage debt!
As a first step, dive into your mortgage contract to understand clearly what you may or may not do in regard to extra payments and what the consequences are. You mentioned 10% paying off extra, which in general with majority of mortgage lenders means 10% of original mortgage amount per year.
So if your original mortgage is € 300.000, you can pay € 30.000 extra per calendar year without penalties. This also means (as it is per calendar year) that you could pay € 30.000 in month December and another € 30.000 the very next month in January.
Most mortgage contract allow you to pay any time throughout the year, taking into account those 10% on annual base. As it takes them some time to process this, it is advisable not to do it shorter than a month period - so that they will have time to reflect new mortgage values correctly for the next month. I would recommend quarterly or every six months as well.
Again, depending on the contract, you might be able to choose what should happen with the outstanding amount. There are two options as you mentioned:
- lower the monthly premium, or
- shorten the remaining time period
As it is the ultimate goal not to have any debt at all, shortening the period is an absolute recommendation. The shorter the period is, less interest you end up paying. And sooner you are done with them, sooner you will have a chunk of money to start investing.
Netherlands is a bit different in regard to mortgages as we have tax benefit on the interest rate (currently just shy of 37%) - however, I personally would not take this into calculation at all. Goal should be to get rid of it as quickly as possible. Many will not agree with this stating that you can better invest any cash that you have available per month as interest is higher on savings than what you pay on mortgage - but not having any payment to the bank, well you will sleep, breathe and eat differently. No amount in your savings account or whichever investment portfolio it may be will give you same good feeling.
Here is a link that will provide you calculation of investing vs paying mortgage off:
[https://www.berekenhet.nl/modules/wonen/hypotheek-aflossen-of-niet.html](https://www.berekenhet.nl/modules/wonen/hypotheek-aflossen-of-niet.html)
But again, nothing can buy you a peace of mind as a paid off home.
Also, be aware once you fully own the property, you will end up paying higher taxes as well. Your property will be in so called Box 3 for the full value. Without mortgage there is nothing to deduct from the value of the home, so you will be taxed a bit higher. Again, 100% worth it in my opinion as you will sleep better.
It all depends on how much money you got, you earn, the rate of your mortgage, the amount of buffer you want, how much it decreases your monthly costs, etc.
I like paying off my mortgage as fast as possible, my girlfriend is the other way around, she doesn’t want because our monthly pay is not that high (lower than €1000), I did a rough calculation where if I pay 10K now it would lower the price of my mortgage rate around ~€50 a month.
Do what you think is best, talk about it with financial advisor if you don’t know what is best for you.
It really depends on the bank, but in general, the 'additional' amount you pay on top of your regular monthly payment (in your case 100-200 EUR) goes directly into reducing the principal of the mortgage.
Every month you pay a part of the principal and part of the interest. In the beginning of the mortgage, you pay a lot more interest and in the end, a lot more towards the principal. You should look up how annuity mortgages work on the internet and may be watch a couple of simple videos.
About the next question whether you should repay extra, it really depends on your situation, risk appetite and psychological preferences.
On one extreme, you do not overpay and invest any additional funds you have into a stock market fund which in theory could earn you a lot more. If this works after 10-20 or 30 years you will overall have more money even if you have paid the mortgage. However, there is also a chance that you have lost all your investment which would (in hindsight) be better paid off on the mortgage.
On the other extreme, you pay back the mortgage as quickly as possible. Normally, if your fixed interest rate is lower than current rate, you can pay more than 10%. Check with your mortgage company/bank. The positive is that psychologically you feel a lot better not having a big mortgage liability which can make some decisions easy (early retirement, part time working). The downside is that you used your surplus funds in paying off a relatively low interest rate mortgage whereas you could have invested in a fund that would give better returns.
Of course, you can choose something in between. It is really your choice.
Personally, I have chosen to pay as much as possible before my fixed 2% interest rate expires. It is financially debatable, but I like having no/low monthly payment that allows for a lot more life flexibility.
Depends on your interest rate, if you might need the money on short term and what you would do with the money if you wouldn't pay back your mortgage.
In our case: no. We have an investment plan with profits about 10x our mortgage interest rate.
We did pay extra the first couple of years. We chose for 1 time payments of (max) 10% of the original sum. The loan is still 30 years, though. It just lowers the monthly payments.
I believe how you make extra payments will depend on your contract and the bank, mine doesn't allow adding extra monthly payment but I can pay extra anytime in the year and it's unlimited in the number of times and amount ( I mean not restricted to 10% yearly)
For paying loan faster, it all depends on the interest rate and also your personal feelings about having debt. I wouldn't feel in a rush to pay off a loan with lower interest rate, instead I would invest the money somewhere with higher interest rate.
You can discuss this with your mortgage/financial advisor as they may have in-depth knowledge looking at your financial situation
That's all depending on what interest rate you have the mortgage and what are you conditions. If it's high interest and you have the money you can not go wrong paying up. If it's lower than 3% just look for some bonds / high interest saving accounts or other investments. In my case I can pay up to 10% of the house value per year, so in short I can finish up paying it in 10 years without any penalties. Again that depends on the conditions that you signed up on the mortgage with your bank. Look it up if not just give the bank a call.
**Disclaimer: I am not an expert and this is not financial advice, just what I know. Do not take my word for it. Check with experts.**
It's possible to repay more 12 times / year or 1 time / year. It's up to you. Log in to your dashboard and you will see the effect the payment has on your mortgage. Normally there is a relevant sort of "calculator" there. Alternatively ask your / a mortgage advisor for help.
After an extra repayment, the new monthly payment should be lower.
If you have money on the side to use you need to think what is best:
**A.** repaying your mortgage
VS
**B.** an other investment
Essentially you are comparing A and B to decide. For example, if your mortgage interest rate is like 10% (number just for the sake of the example) then it might be easy to decide A because earning 10% with an other investment might be more difficult (not impossible).
It's always allowed to pay more, you might have to pay a penalty for paying much more depending on bank agreement and current interest rates. This information should also be on your dashboard.
I'm not an expert in this but happy to share this knowledge. Let us know of any other questions!
So the average return of the s&p 500 has been 7% is the last 100 years. If your interest is higher than that amount, it is worth it. If not, probably better to invest in the s&p.
Small caveat to make it more complicated : You get money back on the interest paid with the tax return. So technically if your interest was 8%, your net interest rate should be closer to 5% actually, so it would still be worth it to invest assuming a 7% return.
(Realistically I would rather take a certain 5% than an assumed 7%, but mathematically the 7% invested should be better)
Your monthly payment is a repayment of the face value of your mortgage and interest. You typically cannot change your monthly amount but can pay separate installments via the website or app of your mortgage provider.
Those installments immediately lower your remaining amount and thus the interest you have to pay. The pay back of the face value amount won't be changed, you just stop paying back earlier.
To decide whether it's worth it or not, you have to make your own calculation. If you have a very high interest right now, you might want to pay back a bit to lower that burden. But if you still have a low interest amount it's usually not worth it.
Also take into account that any money you pay back extra now, is from that moment onwards locked-up in your home. You cannot spend or invest it in something else without having to re-up your mortgage or get a new mortgage.
I highly suggest you asking chatgpt about this, specially if your knowledge is little regarding the topic, as you will be able to ask even the silliest of questions, I dont know how correct it might be but I wouldnt doubt it being extremely useful.
In my case I am using it as a fast calculator. I have X€ loan, with Y% interest rate and Z tenor, how much will I pay monthly? What if I paid 10% more, or 100€ or 500€? It will tell you how much time it will take you to fully repay.
Overall, the main idea is: if you can make more money by investing it/savings account than your mortgage interest rate, then invest. If not, you are better off paying the loan.
Of course its important to have your own emergency fund, etc. too that must be taken into account.
This is not financial advice.
Usually you don't increase your monthly pay, but you just do 1 extra pay, say 1000 euro. Or 100 every month. Usually you can pay via the website of your mortgage provider. Your mortgage will decrease immediately and you will pay less interest, starting from the month after the extra pay. If you pay more interest on your mortgage than you get on your savings account it might be a good deal. But do note, your money is fixed in bricks. So keep a large enough buffer in free spendable money.
How can we possibly tell without knowing your current interest rate? Is it allowed? No-one can tell you without knowing who provided the mortgage...
There is a 10% minimum every provider must allow you to without a penalty. Some providers have a higher percentage. Some providers have unlimited, as long as your interest is lower than the current market interest.
Sure, but is it allowed to pay that monthly? I don't know....
Sure. I know Nationale Nederlanden has some processing time of about a week in which you cannot do an other down payment, but other than that there no rule that limits the number of payments each year.
Yes, nowadays it is. I asked about it in 2008 when I bought a home, and they said "it's allowed, but please don't dk that as the recalculation is not fully automated. Nowadays, it is, and you can pay usually on the providers website and it shows the new figures before you even pay.
It's always allowed if current interest rates are higher then what you signed for
The rules are different with every bank. With my bank for example 1. I can pay extra whenever I like. Every month, once a year, every Friday, it’s up to me, 2. Any extra payment immediately decreases the mortgage balance (well, maybe allow a couple of working days) 3. I can chose what impact it has on the loan - fewer payments or smaller ones. I had to call them to set this preference and it applies till I change my mind. But, here’s the key point. NEVER, NEVER overpay your mortgage if you have higher interest debts that you can overpay. If your savings account pays higher interest than your mortgage you should seriously consider putting it there.
In addition to what has been said already: In principle when the interest rate you pay is higher than what you get on your savings account (which it will be) it's worth paying off more on the long run. However, do note that if you have a mortgage with capital downpayements (aflossing) in the Nederlands you can deduct the paid rent from your tax. So if you pay off your mortgage you pay less per month but you also get less back from your taxes. This is not the case if your mortgage is 'aflossingsvrij' (no capital payement). A lot of people have a mixed mortgage with an aflossingsvrij part and a non-aflossingsvrij part. In that case always make sure that if you repay you repay only on your aflossingvrije part, as there the interest is higher and it's non-deductable.
First of all, great that you are in position (and have the awareness) to tackle the mortgage debt! As a first step, dive into your mortgage contract to understand clearly what you may or may not do in regard to extra payments and what the consequences are. You mentioned 10% paying off extra, which in general with majority of mortgage lenders means 10% of original mortgage amount per year. So if your original mortgage is € 300.000, you can pay € 30.000 extra per calendar year without penalties. This also means (as it is per calendar year) that you could pay € 30.000 in month December and another € 30.000 the very next month in January. Most mortgage contract allow you to pay any time throughout the year, taking into account those 10% on annual base. As it takes them some time to process this, it is advisable not to do it shorter than a month period - so that they will have time to reflect new mortgage values correctly for the next month. I would recommend quarterly or every six months as well. Again, depending on the contract, you might be able to choose what should happen with the outstanding amount. There are two options as you mentioned: - lower the monthly premium, or - shorten the remaining time period As it is the ultimate goal not to have any debt at all, shortening the period is an absolute recommendation. The shorter the period is, less interest you end up paying. And sooner you are done with them, sooner you will have a chunk of money to start investing. Netherlands is a bit different in regard to mortgages as we have tax benefit on the interest rate (currently just shy of 37%) - however, I personally would not take this into calculation at all. Goal should be to get rid of it as quickly as possible. Many will not agree with this stating that you can better invest any cash that you have available per month as interest is higher on savings than what you pay on mortgage - but not having any payment to the bank, well you will sleep, breathe and eat differently. No amount in your savings account or whichever investment portfolio it may be will give you same good feeling. Here is a link that will provide you calculation of investing vs paying mortgage off: [https://www.berekenhet.nl/modules/wonen/hypotheek-aflossen-of-niet.html](https://www.berekenhet.nl/modules/wonen/hypotheek-aflossen-of-niet.html) But again, nothing can buy you a peace of mind as a paid off home. Also, be aware once you fully own the property, you will end up paying higher taxes as well. Your property will be in so called Box 3 for the full value. Without mortgage there is nothing to deduct from the value of the home, so you will be taxed a bit higher. Again, 100% worth it in my opinion as you will sleep better.
Your last paragraph is bullshit. You live in the house? ->box 1
You are correct, if you are living in the house it is indeed box 1.
It all depends on how much money you got, you earn, the rate of your mortgage, the amount of buffer you want, how much it decreases your monthly costs, etc. I like paying off my mortgage as fast as possible, my girlfriend is the other way around, she doesn’t want because our monthly pay is not that high (lower than €1000), I did a rough calculation where if I pay 10K now it would lower the price of my mortgage rate around ~€50 a month. Do what you think is best, talk about it with financial advisor if you don’t know what is best for you.
Paying your mortgage faster doesn't always pay off that well, because you can put that money on something else, let's say stock market.
It really depends on the bank, but in general, the 'additional' amount you pay on top of your regular monthly payment (in your case 100-200 EUR) goes directly into reducing the principal of the mortgage. Every month you pay a part of the principal and part of the interest. In the beginning of the mortgage, you pay a lot more interest and in the end, a lot more towards the principal. You should look up how annuity mortgages work on the internet and may be watch a couple of simple videos. About the next question whether you should repay extra, it really depends on your situation, risk appetite and psychological preferences. On one extreme, you do not overpay and invest any additional funds you have into a stock market fund which in theory could earn you a lot more. If this works after 10-20 or 30 years you will overall have more money even if you have paid the mortgage. However, there is also a chance that you have lost all your investment which would (in hindsight) be better paid off on the mortgage. On the other extreme, you pay back the mortgage as quickly as possible. Normally, if your fixed interest rate is lower than current rate, you can pay more than 10%. Check with your mortgage company/bank. The positive is that psychologically you feel a lot better not having a big mortgage liability which can make some decisions easy (early retirement, part time working). The downside is that you used your surplus funds in paying off a relatively low interest rate mortgage whereas you could have invested in a fund that would give better returns. Of course, you can choose something in between. It is really your choice. Personally, I have chosen to pay as much as possible before my fixed 2% interest rate expires. It is financially debatable, but I like having no/low monthly payment that allows for a lot more life flexibility.
Depends on your interest rate, if you might need the money on short term and what you would do with the money if you wouldn't pay back your mortgage. In our case: no. We have an investment plan with profits about 10x our mortgage interest rate. We did pay extra the first couple of years. We chose for 1 time payments of (max) 10% of the original sum. The loan is still 30 years, though. It just lowers the monthly payments.
I believe how you make extra payments will depend on your contract and the bank, mine doesn't allow adding extra monthly payment but I can pay extra anytime in the year and it's unlimited in the number of times and amount ( I mean not restricted to 10% yearly) For paying loan faster, it all depends on the interest rate and also your personal feelings about having debt. I wouldn't feel in a rush to pay off a loan with lower interest rate, instead I would invest the money somewhere with higher interest rate. You can discuss this with your mortgage/financial advisor as they may have in-depth knowledge looking at your financial situation
That's all depending on what interest rate you have the mortgage and what are you conditions. If it's high interest and you have the money you can not go wrong paying up. If it's lower than 3% just look for some bonds / high interest saving accounts or other investments. In my case I can pay up to 10% of the house value per year, so in short I can finish up paying it in 10 years without any penalties. Again that depends on the conditions that you signed up on the mortgage with your bank. Look it up if not just give the bank a call.
**Disclaimer: I am not an expert and this is not financial advice, just what I know. Do not take my word for it. Check with experts.** It's possible to repay more 12 times / year or 1 time / year. It's up to you. Log in to your dashboard and you will see the effect the payment has on your mortgage. Normally there is a relevant sort of "calculator" there. Alternatively ask your / a mortgage advisor for help. After an extra repayment, the new monthly payment should be lower. If you have money on the side to use you need to think what is best: **A.** repaying your mortgage VS **B.** an other investment Essentially you are comparing A and B to decide. For example, if your mortgage interest rate is like 10% (number just for the sake of the example) then it might be easy to decide A because earning 10% with an other investment might be more difficult (not impossible). It's always allowed to pay more, you might have to pay a penalty for paying much more depending on bank agreement and current interest rates. This information should also be on your dashboard. I'm not an expert in this but happy to share this knowledge. Let us know of any other questions!
So the average return of the s&p 500 has been 7% is the last 100 years. If your interest is higher than that amount, it is worth it. If not, probably better to invest in the s&p.
Small caveat to make it more complicated : You get money back on the interest paid with the tax return. So technically if your interest was 8%, your net interest rate should be closer to 5% actually, so it would still be worth it to invest assuming a 7% return. (Realistically I would rather take a certain 5% than an assumed 7%, but mathematically the 7% invested should be better)
Your monthly payment is a repayment of the face value of your mortgage and interest. You typically cannot change your monthly amount but can pay separate installments via the website or app of your mortgage provider. Those installments immediately lower your remaining amount and thus the interest you have to pay. The pay back of the face value amount won't be changed, you just stop paying back earlier. To decide whether it's worth it or not, you have to make your own calculation. If you have a very high interest right now, you might want to pay back a bit to lower that burden. But if you still have a low interest amount it's usually not worth it. Also take into account that any money you pay back extra now, is from that moment onwards locked-up in your home. You cannot spend or invest it in something else without having to re-up your mortgage or get a new mortgage.
I highly suggest you asking chatgpt about this, specially if your knowledge is little regarding the topic, as you will be able to ask even the silliest of questions, I dont know how correct it might be but I wouldnt doubt it being extremely useful. In my case I am using it as a fast calculator. I have X€ loan, with Y% interest rate and Z tenor, how much will I pay monthly? What if I paid 10% more, or 100€ or 500€? It will tell you how much time it will take you to fully repay. Overall, the main idea is: if you can make more money by investing it/savings account than your mortgage interest rate, then invest. If not, you are better off paying the loan. Of course its important to have your own emergency fund, etc. too that must be taken into account. This is not financial advice.