Before you take out a mortgage, you naturally want to know what monthly costs the mortgage generates. However, calculating the monthly costs is quite complicated, because many different factors play a role in this. In this article you can read which factors play a role in the calculation of your mortgage costs and how you can make smart savings on this.
Mortgage monthly payments – interest-only
The first important factor is your mortgage type. If you partly have an interest-only mortgage, you only pay interest on the interest-only part. Because you do not pay any repayments, this saves a lot in monthly payments. The disadvantage of this is that you continue to have a mortgage debt, even if you are no longer entitled to mortgage interest relief after 30 years. If you take out the interest-only mortgage after January 1, 2013, you are not entitled to mortgage interest relief anyway.
Calculate mortgage expenses – Annuity mortgage
With an annuity mortgage, your monthly payments remain the same throughout the repayment period. For the repayment this means that your monthly payments consist primarily of interest and to a small extent of repayment. But because you do pay off, the amount that you have to pay in interest decreases each month, so you gradually pay more in repayment and less in interest.
Calculate mortgage charges – Linear mortgage
With a linear mortgage, your monthly payments decrease during the term. You pay off a fixed amount every month and you pay interest on top of it. The repayments reduce the amount of interest that you have to pay each month, so that your monthly costs also fall.
Calculate mortgage monthly payments – Mortgage interest
A large part of the monthly costs consists of the interest that you pay. The higher the mortgage debt, the higher the amount that you pay in interest.
In addition, the amount that you pay in interest depends on the interest rate. The bank determines this, among other things, on the basis of the mortgage loan, your mortgage type and the market interest rate. Moreover, the interest rate varies per mortgage lender.
The mortgage interest also depends on your fixed-rate period. The longer the fixed-rate period, the higher the fixed interest. But this does offer certainty about your monthly payments. With a variable interest rate you never know in advance exactly what will happen to your monthly payments, because this interest rate can be raised or lowered at any time.
Calculate mortgage monthly payment – Tax
Finally, you will have to deal with a number of mortgage rules. The most important mortgage rule is of course the mortgage interest deduction. Depending on the tax bracket in which your income falls, you will receive a certain percentage of the mortgage interest paid.
You also pay a notional rental value. The Tax Authorities usually already settle this tax with the mortgage interest deduction. Finally, you pay Property tax (OZB) to the municipality. The rates for this vary per municipality, but on average this tax is slightly more than 0.1 percent of the WOZ value of your home.