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We asked several mortgage brokers about the biggest misunderstandings they encounter in their daily work. The answers may surprise you, but also help you better understand the sometimes tricky business of the world of mortgage applications.
Here are seven misconceptions and explanations about them that are most common. Take advantage of them!
1. You must pay off surplus value on your new home or mortgage
Chances are there is excess value when you sell your home. The selling price is then higher than the mortgage amount that was still outstanding.
It is often thought that you must always use this for your new home, but this is not so, you have a free choice. It does affect your mortgage interest deduction if you use the excess value otherwise.
2. An annuity mortgage is better than a linear one
With an annuity mortgage, interest is paid primarily in the beginning and repayment later. Each month, as long as the interest rate does not change, the same amount is repaid.
A straight-line mortgage is more expensive in the beginning because it pays mostly interest in the beginning, but becomes cheaper and cheaper later on. Because you pay off the debt faster, you pay less mortgage interest over the total term.
Despite this, many first-time homebuyers are tempted to take out annuity mortgages.
A shame, because a linear is cheaper over the entire term because less interest is paid. That can save many thousands of dollars.
3. You don’t have to repay an interest-only mortgage
It’s a logical conclusion by the name of this form of mortgage, but it’s not true.
The bank simply expects a repayment, but no date has been agreed upon. Yet the mortgage does have an end date.
In principle, when the end date is reached, the bank can decide not to renew the mortgage. In practice, it will not happen often, but it can happen.
4. You can get a mortgage that is as high as your monthly rent in terms of monthly expenses
It is sometimes thought that if you rent a house for a certain amount per month, you can also buy a house whose monthly mortgage payments are around the same amount.
But that’s not always the case. The mortgage lender determines how much you can borrow based on your income.
If you have debts, such as student debt, a private lease, a phone contract or if you have to pay alimony, this maximum amount will be lower.
5. You can’t get a mortgage with student debt
It is not that you cannot get a mortgage with student debt. However, study debt is included in your maximum mortgage and you can therefore borrow a lower amount.
If you have a loan according to the old loan system (before 1-9-2015) then a monthly charge of 0.75% of the starting amount of your loan is calculated.
If your loan falls under the new loan system (after 1-9-2015), a monthly charge of 0.45% of the starting amount of your student debt is assumed.
6. It is difficult to get a mortgage as a self-employed person
There is often a perception that as a self-employed person, it is difficult or impossible to get a mortgage. Fortunately, this is not the case. Nowadays, you can get a mortgage after just one year of self-employment!
However, it is important that your business shows growth. That’s why your financial situation is reviewed in detail.
This is because then the bank takes a different approach. As a self-employed person, they want to see the accountant’s annual figures for the past three years.
7. You can no longer co-finance a remodel with your mortgage
In your mortgage, you can co-finance a remodel. If you increase your mortgage, you get more budget for a new kitchen or extension.
It is then necessary to determine the market value of the home after the renovation. The mortgage can then be increased based on this market value. You can usually finance up to 70% (or more) of the cost of the renovation with the mortgage and 30% of it will come from your own resources.
If you are not only going to remodel but also make your home more sustainable, you even have extra room to borrow and up to 106% of the market value. You do have to spend the extra money entirely on energy conservation.
Mortgage2Go
Before you go house hunting, do you want to get the financing just about right?
Then Mortgage2Go offers the solution. With a pre-approved mortgage, you already have the financing in place and can be sure you can afford your dream home.
Do you meet the requirements? Start an application for a pre-checked mortgage!
Relevant information:
Checklist: what do you need for a mortgage application?
