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Financing penalty interest

The mortgage lender can charge penalty interest if you decide to transfer your current mortgage. This fine compensates for the loss of interest income from your mortgage. You can pay the penalty interest in one go with your own money, with the help of a loan, or you can choose to pay it in installments. We list the options.

When do you get penalty interest?

Interest rates are historically low. Chances are that you will pay a much higher interest rate for your current mortgage. Refinancing can save a lot of money.

You will receive penalty interest from your mortgage provider if you decide to transfer your mortgage to another provider. Penalty interest can also be charged if you want to pay off extra money to reduce your mortgage amount. You may repay 10 to 20% of the mortgage each year without penalty. If you exceed this percentage, a penalty interest will be charged. To partially offset your calculated interest income, you pay the mortgage lender a fee in the form of penalty interest. The amount of the fine differs per situation. The fine can be requested from the bank where your mortgage is placed.

Financing penalty interest

Paying the penalty interest in one go is cheaper than paying in installments . If you cannot pay the amount of the fine with your own money, then taking out a loan is an option to pay the penalty interest. You can take out a Personal Loan or a Revolving Credit with us. For this loan purpose we recommend a Personal Loan for a maximum of 10 years. You can repay extra on this loan without penalty, so that the loan is paid off in full sooner.

You can also increase your mortgage to pay the penalty interest. However, a personal loan has a few advantages over increasing the mortgage:

  • the term of a loan is shorter. As a result, you pay less interest and the total costs are lower.
  • you do not pay any closing and advice costs for taking out a loan. When you increase a mortgage, you pay closing and notary costs

Tax-deductible

Financing your penalty interest with a Personal Loan gives you a tax advantage: the penalty interest to be paid is tax-deductible once . The net amount that you have to pay in total is therefore lower thanks to this tax benefit. For example, if you are in the 42% pay scale and your penalty interest is € 15,000, you will receive a one-off refund of approximately € 6,300.

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