Investment mortgage: mortgage with capital insurance

A popular type of mortgage in the past was the investment mortgage. The mortgage runs together with a capital insurance policy, also known as investment insurance. An investment mortgage is actually an interest-only mortgage that is repaid at the end of the term with the payment from the capital insurance. Your monthly payment consists of interest on the mortgage sum and premium for the capital insurance.

Capital insurance

With an investment mortgage you are not obliged to take out mixed insurance. For example, if the mortgage is lower than the foreclosure value, you can take out life insurance. In the event of death, no payment will be made. The amount of the insurance payment is not fixed in advance, because the premium is invested . The question is therefore whether the lifetime benefit will be sufficient. With a mixed insurance policy, the death benefit is often a fixed amount.

Risk

With the endowment insurance, in this case also called investment insurance, you can indicate with which investment institution or funds you want to invest. You can invest in shares, bonds, real estate or cash. Combinations are of course also allowed. The insurer indicates the expected return and what the risk is. Naturally, high risk is rewarded with a higher expected(!) return.

Unit linked

With unit-linked insurance you can switch from one investment institution to another. In the Netherlands, unit-linked freedom of choice is often combined with universal life flexibility.

Universal life insurance

With a universal life insurance policy, the deposit is paid into investment funds. All costs are paid from this fund, so you are free to determine the amount and payment frequency. You can also choose the term and form of the benefit.

Advantages

Advantages of the investment mortgage:

  1. Mortgage interest deduction is maximum for the entire term
  2. You decide how your savings premiums are invested
  3. You benefit from any high returns on the stock markets
  4. Gross and net costs remain constant

Cons

The disadvantages of an investment mortgage:

  1. There is no certainty whether enough has been built up at the end of the term to repay
  2. You run a risk in the event of a sharp fall in prices
  3. Payments are only tax-free under certain conditions

Repayment

From 2013, you will be required to make repayments on new mortgages to qualify for mortgage interest deduction . Starters can therefore only choose from the linear and annuity mortgage. People who already owned an investment mortgage can continue with this mortgage.

read more

  • Interest-only mortgage: no repayments during the term
  • Life mortgage: mortgage with life insurance
  • Savings mortgage: advantages and disadvantages of this mortgage
  • Hybrid mortgage: the savings investment mortgage