Early mortgage repayment
Making early mortgage repayments may work out well now that interest rates on credit balances in savings accounts with banks are so low: although mortgage interest rates too have fallen to near-record lows, they still top the interest rates on savings by several percent. Penalty-free early redemption is a common option for up to 10% (to as much as 20% depending on your contract) of the original principal of the loan. Better still, early redemption using your savings reduces your “Box 3” capital yield tax base.
Tip:Consider whether making early repayments towards your mortgage loan would make sense in your particular situation.
You may in the past have opted in favour of locking in the interest rate on your mortgage loan for a longer period of time, at a higher rate than is currently available. It may be worth your while to inquire with your bankers how much they would charge you extra if you were to renegotiate the terms of your mortgage loan and lock in the new interest rate at today’s lower level. As the majority of mortgage contracts typically feature some sort of early repayment penalty exemption, you may be pleasantly surprised at the result of mortgage renegotiation – not least given that the penalty interest you’d have to pay would qualify for tax relief.
Tip:Why not indulge in a spot of “shopping around” with other lenders, to find out what is currently available in the market? Refinancing might well be to your advantage on balance!
Tip:Your own private limited-liability company may be a most useful mortgage lender. You may be pleasantly surprised by the financial rewards!
If it looks as if your Box 1 income in 2017 will turn out considerably lower than that in 2016, you may want to consider making a lump-sum mortgage interest payment for the first half of 2017 on inclusion of the corresponding tax relief in your 2016 income tax return.
Dutch version: Hypotheek extra aflossen