The life mortgage is a combination of an interest-only mortgage and life insurance (capital insurance). The loan is repaid at the end of the term or in the event of the earlier death of the insured person(s) with the benefit from the life insurance policy. With this form, tax-free capital is built up and benefits from the interest deduction.

Benefits of a life mortgage

Because you in principle do not make any repayments during the term of the loan, your tax deductible remains unchanged at the same interest rate. This of course has a positive effect on your net mortgage costs. In addition, you have a tax advantage: because you do not repay, you can fully deduct your mortgage interest over the entire term of the mortgage, while the interest you receive on the savings premium is tax-free. However, the latter is subject to strict conditions.

• in many cases you build up tax-free assets;
• additional tax benefit possible for policies taken out before January 1, 1992;

Compared to mortgage types with interim repayments:

• more tax efficient; because you do not repay, the tax deduction is maintained during the term;

Compared to investment mortgages:

• less investment risk: you usually have a guaranteed return; there is often an insured capital during life.

Disadvantages of a life mortgage

In contrast to these low mortgage costs, the disadvantage is that the tax conditions make the life mortgage a straitjacket. Furthermore, the amount of the benefit via the linked mixed insurance is not certain. Often part of the payment is not guaranteed, but depends on a so-called profit distribution, the amount of which is not fixed in advance. Another disadvantage concerns the surrender value or payment in the event of early termination. It is not possible to calculate the surrender value yourself. Moreover, it is almost always disappointing.

• the guaranteed return is usually quite low; the company usually invests the premium in bonds, etc.;
• you usually have no choice regarding the investment;
• the total final capital to be achieved is often uncertain because part of the payment consists of profit sharing;
• life insurance usually has an opaque cost structure;
• you usually have no insight into the value of the policy during the term;
• usually a minimum mandatory life insurance policy;
• the final capital is only tax-free up to a certain maximum;