Interest-only mortgage

With an interest-only mortgage you in principle only pay interest during the agreed term. You are not contractually required to repay every month. As a result, monthly costs are usually lower than with a mortgage you do repay.

On the other hand, the mortgage debt does not go down by itself. At the end of the term the remaining debt has to be repaid or, if that is possible and responsible, refinanced.

Points to keep in mind

• The debt remains as long as you do not repay voluntarily.
• At the end of the term the loan has to be repaid or reassessed.
• Affordability after retirement deserves extra attention.
• Extra repayments are often possible, but the conditions differ per lender.

Mortgage interest deduction

For a new home loan taken out from 1 January 2013, the loan must in principle be repaid at least on an annuity or linear basis within at most 30 years to qualify for mortgage interest deduction. A new interest-only part normally does not meet this.

If you already have a mortgage from before 2013, transitional rules may apply. When you refinance, move or change your mortgage, different tax rules may then apply.

How much can be interest-only?

Many lenders limit the interest-only part to a certain percentage of the market value. The exact options differ per lender and depend on, among other things, your income, age, the value of the home and your existing mortgage.