Homeowners must meet their obligations to the bank every month. Financial setbacks may temporarily cause payment problems. By setting an interest rate pause, homeowners can temporarily pay less mortgage interest. ING announced in December 2012 that it will actively approach customers who are suspected of having difficulty meeting the monthly mortgage payments. The bank offers the option to set a temporary interest rate pause. In this way, the customer can weather a difficult financial period and catch up on the arrears in better times. For example, unemployment, disability or a temporary dip in the turnover of a self-employed person can cause homeowners to experience financial problems. Temporarily they do not have the option to pay the monthly costs in full. The banks also benefit from preventing houses from having to be foreclosed on. Due to the falling house prices, the interests of the banks have even become much greater. They know that the house may not yield enough to pay off the remaining mortgage debt. Nowadays, banks want to think better about their customers, but that is mainly in their own interest.
A temporary interest rate pause
A temporary interest pause can be compared to a deferment of payment. In consultation with the customer, the bank will temporarily collect lower mortgage interest amounts to give the homeowner more breathing space. However, the bank will not simply do this. There must be a prospect of improving the financial position. A family that has built up high debts can be granted a deferment of payment, but in this case it is actually certain that the obligations cannot be met even after the deferral period. After the interest rate pause, monthly costs will increase because a deficit will have to be made up.
In case of payment problems, consult with the bank
In the event of payment problems, the alarm is often raised too late. As soon as you know that payment problems will arise, you should contact the bank. A payment arrears of a few months cannot be covered with an interest rate pause. The bank will no longer be prepared to do this, because the resulting deficit will first have to be made up.
Postponement is not remission
It is often wrongly thought that something can be arranged with the bank and that they will settle for a lower payment. They will not do this, but they can, in consultation, temporarily defer part of the payment. Banks are commercial companies that aim to fully recover the amount lent. Their first priority is to benefit financially themselves. A payment arrangement is also in the bank’s interest. In this way, greater financial damage can be prevented.
No mortgage interest deduction on deferred amount
If you have been granted a deferral of payment of part of the mortgage interest, you should also consider that you also have a lower tax benefit. When you pay the interest, it is deductible. This may also influence the amount of the provisional refund. The provisional refund may be too high, meaning that you will have to repay part of the advance received to the tax authorities after the annual tax return.