Boeterente bij aflossen, oversluiten en middelen ( Penalty interest on repayments, refinancing and funds )

What is Boeterente (penalty interest)?

Lenders charge a penalty if the mortgage is repaid earlier than agreed in the mortgage agreement, for example when refinancing. With the penalty interest, the lender compensates for the lost income from the mortgage.

Penalty interest on repayment

When you take out a mortgage, it is recorded in the mortgage deed about the term of the mortgage and how much you pay off (or not) each month. Lenders leave room to make extra repayments without penalty. This is a maximum amount or a percentage of the mortgage debt, on average around 10% or 20%. However, if you pay off more, the bank will charge a fine for this.

Penalty interest on re-closing

When refinancing, you take out a new mortgage, with which you pay off the old mortgage in full in one go. When the current mortgage interest is lower, this results in savings. Because the old lender charges a penalty for repaying the mortgage in one go, the amount of this penalty determines whether refinancing is interesting. Please note: when your fixed-interest period ends, you can refinance your mortgage without penalty.

The savings from the lower mortgage interest must therefore be large enough to compensate for the fine. To find out whether it is interesting for you to refinance your mortgage, you can take our refinancing test.

Penalty interest with interest averaging

With interest rate averaging, the current mortgage interest rate is averaged with the rate in the market. The lender also charges a penalty for the lost income when averaging the mortgage interest. Unlike with refinancing and repayment, the penalty interest is settled in the new mortgage interest in the case of interest rate averaging. This sometimes creates the idea that interest rate averaging is a cheap way to lower mortgage rates. In reality, you still pay the same fine unnoticed. Read how interest averaging works.

High penalty interest

The amount of the penalty interest depends on various factors. The penalty interest is therefore different for every person and situation. Lenders use the following variables when calculating penalty interest:

1. The original mortgage amount 
2. Current mortgage debt 
3. The remaining term 
4. The mortgage interest you are paying now 
5. The current market rate 
6. The part that you can repay annually without penalty

The penalty interest is high as the mortgage debt is high, the fixed-interest period is long, the interest rate difference is large and the part that can be repaid without penalty is small. The lender will then miss out on most of the income.

The European mortgage directive, which came into effect in 2016, stipulates that the penalty interest may not exceed the actual costs of the lender.

Penalty interest tax deductible

The penalty interest is tax deductible, as long as the mortgage is a deductible loan. This also applies to the penalty interest in the case of interest rate averaging. In the case of averaging, the penalty is settled in the new interest rate and this is deductible.

If part of your mortgage is a consumer credit, the fine is not deductible for that part. If you wish to refinance your mortgage and you want to co-finance the fine, the interest on this part is not deductible.