The bank savings mortgage is one of the many forms of mortgage where starters are no longer eligible for mortgage interest relief. After all, this deduction only applies for starting home buyers who take out a mortgage that is repaid during the term. Therefore, this mortgage loan is no longer interesting for future homeowners.
Until 2013, this mortgage form was immensely popular. But that is still bad enough for this residential loan. For us a reason to look for the ‘bank savings mortgage advantages and disadvantages’ and share them with you. Naturally, other important aspects will also be discussed, such as the transfer or termination of the bank savings mortgage.
The bank savings mortgage consists of mortgage loan and account
The bank savings mortgage consists of 2 completely different components, namely a (mortgage) loan and a so-called ‘blocked account’. You do not solve anything during the term. In other words: the mortgage loan remains in place until the end date has been reached. You deposit a sum of money every month on the blocked account. You thereby build up a capital with which the mortgage loan (if it is good) can be repaid at the end of the term.
Today, taking out a term life insurance policy is mandatory. However, this may also be taken out as separate insurance with an insurer. The savings mortgage was (and still is) known as an advantageous form of mortgage, because the holders are entitled to a ‘tax exemption’. You can read more about this benefit and the other advantages of this mortgage in the header below.
Savings mortgage as a beneficial mortgage thanks to tax exemption
The savings mortgage, as this mortgage is also sometimes called, has a number of advantages. But what exactly are the advantages of a bank savings mortgage? You will undoubtedly derive the greatest benefit from the tax section. For example, holders of bank savings mortgages can benefit from a tax exemption after a few years of savings.
This means that you are exempted for the interest you receive on your savings. You do not have to pay taxes on this. If you took out this mortgage before 1 January 2013, you can also deduct the interest you need to pay on the debt from your income tax. With the bank savings mortgage, you are therefore entitled to mortgage interest deduction. You can choose from 2 different savings options at the bank savings mortgage. We will inform you below.
Variant 1: The Savings Account Private Home
The savings account Gandalf is also reduced with PEW. It is a savings variant of the bank savings mortgage. All information that we shared with you relates to this variant. The blocked savings account is therefore linked to the mortgage loan and a sum of money is deposited every month. You will receive an interest payment on this savings. And that interest is usually as high as the interest that the mortgage lender charges you on the mortgage amount.
The amount of money you have to deposit on the blocked account each month depends on the mortgage amount and the interest. However, this deposit changes as soon as the mortgage interest rate changes. If the mortgage interest rate changes, the savings rate also changes. With the savings variant of the bank savings mortgage you therefore build up capital. At the end of the term you will pay off the mortgage. You do not have to state the accrued assets on the account with the tax return. This gives you a nice tax advantage!
Variant 2: The Investment Account Private Home
Another variant of the bank savings mortgage is the Investment Account Private Home, also abbreviated with WEW. In this case, there is no savings account but an investment account linked to the loan. You also pay a monthly amount. The WEW is a riskier version of the bank savings mortgage. Because the return is never fixed. Whether you make sufficient returns during the term to be able to redeem your mortgage debt depends on the result on the investments.
To repay your entire mortgage, you must build up sufficient capital. And whether that works is always the question with this form of mortgage. Did you take out a WEW savings mortgage before 1-1-2013? Then you are still entitled to mortgage interest relief.
Disadvantages of bank savings loan:
- The bank savings loan / mortgage is no longer provided to starters.
- Savings interest is not always linked to mortgage interest.
Term Life Insurance Insurance with Mortgage
On certain websites it is suggested that taking out a term life insurance policy with a bank savings mortgage is not mandatory. But that is nonsense. This is always mandatory nowadays! You should know that with a bank savings mortgage (PEW) you save the capital by depositing money on a savings account every month.
With this you pay off the mortgage at the end of the term. However, the bank savings account can not provide risk coverage in the event of death. Not pleasant for your next of kin … So the savings balance will be available. But this is still too little at the beginning of the term to be able to repay a large part of the mortgage.
Choose a ‘declining term life insurance’
It is therefore always mandatory to take out a separate term life insurance policy. If you want to take out a new bank savings mortgage or want to convert this mortgage, we advise you to link a ‘falling life insurance policy’ to your bank savings mortgage. Decreased term life insurance is an insurance policy that only covers the missing balance on the savings account. After all, you build up savings balance during the term …
Bank savings mortgage transfer or transfer to next home
It is possible to take an existing bank savings mortgage to a subsequent home. You can then stay with your current mortgage provider. Do you want to immediately switch your mortgage? Of course you can. However, there are several hooks and eyes on this.
Can you take out a mortgage loan from a new provider at a lower interest rate? Then you also pay them a higher amount of premium or deposit. You can partly compensate for this difference by making a deposit. But you also receive less mortgage interest deduction at a lower interest rate. Your monthly costs will therefore almost always increase when you switch over!
Conclusion bank savings mortgages
Take a bank savings mortgage to a next home? Yes, that is possible and even without adverse tax consequences. Do you want to change the mortgage? That is also possible. But you do not do much with it. It may even be that your monthly costs will rise significantly.
Stop the (bank) savings mortgage
Ending the (bank) savings mortgage is also a possibility. With the assets you have saved on the blocked savings account, you can (partially) pay off the housing debt. Do you want to finance a new home? Then you can take out an annuity mortgage or a linear mortgage.