The annuity mortgage is a mortgage which aims to repay the debt during the term of the mortgage, and not at maturity. This makes this type of mortgage is more expensive compared to some other types of mortgages.
A mortgage must be repaid in principle, within a period of thirty years. In tax law, it may be attractive to reserve the first redemption in an insurance or a bank savings product. This amount is then paid off the mortgage in one go. During the term of the mortgage can thus be maximum advantage of the fact that the mortgage interest paid is tax deductible.
In the times that went well on the stock exchange, it seemed attractive also a piece of the pie. This was possible by taking out an investment mortgage. The repayment was spared together in a policy which the investment was held. By high expectations of stock market prices, a portion of the mortgage repayment was left free. The strategy was that it could be paid off in the future with the high yields from the investment policy. Unfortunately, many homeowners have gotten regret this mortgage. The opinion in concluding there was no account of strong negative stock market developments.
The monthly costs that must meet include the homeowner in part from redemption and another portion of mortgage interest and insurance premiums. The monthly payments continue month after month the same, but the composition of the monthly payments is slowly changing. The redemption share is a growing part of the monthly payments. As a result, the gross monthly payments stay the same, but in the course of time there may be less benefited from the mortgage.
This mortgage type has advantages over other types of mortgages, but also disadvantages. A major disadvantage is, for example, that it is an expensive lending form. Because the monthly payments over the life higher than for example a lifetime mortgage or an endowment mortgage, there may be less borrowed. These banks pass on the benefits of this type of mortgage. The risk declines over the term viz. Mortgage debt is shrinking, reducing the risk of the bank.
Despite the higher average cost, the choice of an annuity mortgage is a good choice. A major disadvantage of other mortgages where the repayment is shifted to the future, is that the entire mortgage debt remains intact. As a result, homeowners with an annuity mortgage more resistant to declines in value of their home. There Account must be taken of the possibility that the house must be sold before then, because the house has become priceless. This can be caused by a sharp fall in income due to unemployment, but also through a divorce.
The mortgage lending should just go back to basics. The bank provides a loan and the customer provides an early repayment of this debt. This fiscal point of view not the most sensible choice, but once certainties now cost money.