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Higher interest and higher interest rate: This is a potential disadvantage of the repayment interval for your home loan |  MyGuide

Higher interest and higher interest rate: This is a potential disadvantage of the repayment interval for your home loan | MyGuide

Spaargids.beAre exorbitant energy bills putting you in financial trouble? Individuals who can no longer pay their bills can request a mortgage repayment break from October 1. To be eligible, you must meet certain conditions. If so, you don’t have to pay back any principal from your loan for a year, you only pay interest. But how exactly is that? And is there any catch in the grass? Spaargids.be Find out.


Written by Gianni D’Angelo, in association with Spaargids.be


Last updated:
08:50

A mortgage loan consists of principal and interest payments that you owe to your financial institution at agreed times. If you meet the conditions for deferment, you do not have to repay the principal for a year starting from October 1. You must continue to pay interest. The actual amount of those interest varies from home loan to home loan.

Where can you find the best terms and interest rates for your mortgage loan? View different home loans here.

Example

An example illustrates this. Let’s say you get a home loan from your bank for €220,000, with a fixed interest rate of 2.15% and a term of 25 years. according to Spaargids.be . simulator Then the monthly premium comes to €1,024.04. In the first month, this amount consists of 669.19 euros in capital and 354.85 euros in interest. In the following months, the capital to be recovered increases step by step, while the interest decreases every month. Last month, you still paid €1,024.04, but that amount consists of €1022.23 in principal and €1.81 in interest.

In other words: Anyone who takes a deferral break soon after taking out a home loan is at a disadvantage here, compared to someone who has had a loan in progress for years. Because in the beginning, the amount of capital repayment – which is deferred – is much less than it was in the end. This leaves you with less money to pay your bills, including energy bills.

requirements

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Before making the calculation yourself, you should, of course, check whether you qualify for a payment deferral. After all, some of the requirements are very strict. The home loan must be for your main residence in Belgium. On March 1, 2022, you do not have arrears in the Central Individual Loan Center. On the day you request the extension, you must have less than €10,000 in bank assets. This means that everything is added together in your checking accounts, savings accounts, and securities at all of your banks. Retirement savings do not qualify for €10,000.

Since the bank offering your mortgage loan does not have insight into your financial situation with other banks, you will have to sign a declaration of honor. Another requirement is that you have an existing payment plan or have applied for a payment plan from your energy supplier. Your bank will ask for proof of this.

Loan cost more

When it was decided to introduce deferred payment, the banks promised not to charge any fees. This is positive. But there are things you should think about for a while. During the deferment year, you continue to pay the interest agreed upon with your bank. Increase the term of your loan by one year.

So you also pay interest for a year longer. And this can be a significant amount, especially if you are just starting to pay off your loan. Suppose that in the second month of the installment period, a twelve-month deferral of payment begins. Based on the simulation table in our example, you will pay 4,164.96 euros in interest during that period. Since you also have to pay interest on the extension of your loan, your loan is actually over €4164.96.

Maybe higher interest rates later

Our example of a home loan is based on a fixed interest rate. Even someone who has opted for a variable interest rate can see a lot of money lost through deferment. Especially if the current interest rates are now more favorable than those they were during your loan extension.

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Do you have a variable interest rate? Read more about the risks and potential solutions here.

Housing Bonus

Based on our example in which a home loan was taken out recently, we do not need to take home bonus into account. This has been rescinded since January 2020. But a person who has a home loan taken out before that date may be able to enjoy this tax benefit. But what happens to that bonus due to deferment that year? There is a possibility that due to the deferment you will not pay enough to get your loan to take full advantage during that year. Perhaps the housing bonus for those twelve months of deferment will be reduced. If so, you will pay more taxes for that year.

Reduce your energy bill by boosting your home’s energy performance? Read here how a free renewal loan can provide a way out.


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This article was brought to you by our partner Spaargids.be.
Spaargids.be is an independent comparison of banking products looking for competitive rates and better interest rates.