It’s time. Your property has been sold! For many people that is a big deal. The average home is soon for sale for more than a year. But with the sale of your home, you are usually not completely rid of your mortgage. In many cases, a residual debt remains.
A residual debt is the debt that remains when a house yields less after the sale than the mortgage debt that exists. So if, for example, you sell a house with a mortgage of € 250,000 at a price of € 200,000. Then the remaining debt is € 50,000; the difference between the proceeds and the mortgage debt.
Because not everyone has the option to pay off the residual debt with their own resources, I will discuss the possibilities that you have to finance a residual debt in this blog.
Option 1: You make a (residual debt) arrangement with your mortgage bank
In consultation with the bank where the residual debt remains, you will find an arrangement whereby you will repay the debt in installments. Often at a considerably higher interest rate than the interest you paid for your mortgage. Your mortgage bank is not obliged to cooperate with a residual debt scheme.
Option 2: You take the remaining debt with you in a new mortgage
When you buy a new home and finance it with a new mortgage, many banks offer you the option of financing your residual debt within this new mortgage. Of course you must then meet the mortgage standards.
Option 3: You finance your residual debt with a revolving credit
You can also choose to finance your residual debt with a revolving credit. In this way you opt for flexibility. With a revolving credit, you can always pay extra (fully or partially) without penalty. You may also withdraw the amounts that you have repaid (extra). Only the interest that you pay on the amounts withdrawn is not tax deductible. Other features of a revolving credit are:
* You have a variable interest rate and term
* You only pay interest on the amount withdrawn
* You pay a fixed monthly installment (2%, 1.5% or 1% of the credit limit)
* Your monthly installment consists of interest and repayment
Option 4: You finance your remaining debt with a personal loan
In addition, you can choose to finance your residual debt with a personal loan . With this you opt for certainty; the certainty of a fixed monthly period, a fixed interest rate and a fixed term. You can therefore perfectly match the duration of your personal loan to the maximum term that you may deduct your interest for tax purposes. Other features of a personal loan are:
* You borrow a fixed amount once
* You know in advance where you stand
* At a number of banks, you may recently repay without penalty
The interest is tax deductible
It has just been mentioned, the interest you pay on your residual debt is tax deductible. This applies to both a revolving credit and a personal loan. The condition here is that the residual debt arises after October 29, 2012. Since 1 January 2015, the period that you may deduct this interest has even been extended from 10 to a maximum of 15 years! So make sure that the maximum duration of your loan is 15 years.
Obtain information in advance
In any case, it is important that you are properly and timely informed about the options for financing your residual debt. Even if your home has not yet been sold, that is wise. After all, you want to know what awaits you. The CreditPostol partner banks can also issue an agreement for a residual debt loan, subject to the definitive sale of your home. This way you know before you start selling the property that you have arranged your residual debt financing properly.
Of course at the lowest possible interest and without closing or consultancy costs. As you are used to from CreditPostol. Do you have questions about your residual debt? Or do you need help with taking out a residual debt loan?