The basic principle of all life insurance mortgages is the same. There is no intermediate amortization and they all use life insurances to cover the final debt pay-off. There is a large variety, basically categorised into four groups: savings mortgages, traditional life insurance mortgages, modern life insurance mortgages and the hybrid mortgages.

Savings mortgages
Security is the key word of a savings mortgage. At the end of the lifetime of the mortgage, one has saved enough to pay off the whole debt.

The characteristics
• No pay-off obligations during lifetime of mortgage;
• Fix monthly charges consisting formed by premium and interest.
• The savings part of the mortgage can be put tax-free in Box 1;
• Maximum profit of fiscal deductions;
• Guaranteed pay-off at the end of the mortgage’s lifetime;
• The mortgage interest determines the (guaranteed) output of the savings premium.
• Death risk is insured against a fixed premium;
• The combination insurance provider- insurance company is fixed
• Payment of saved premiums is tax-free if certain conditions are fulfilled

Saving
With a savings mortgage one saves for the pay-off of the debt. The monthly charges contain for one part the mortgage interest and for the other part the premium. Large part of the premium generates interest. The interest percentage is the same as the percentage of mortgage interest one has to pay. At the end of the lifetime of the mortgage, the total amount of premiums paid and the interest earnings generated by it, equals the debt.

Low interest, high premium and vice versa
Is mortgage interest at a low level? Than also the interest on your savings is low.
A low interest rate means that one has to pay a higher premium to save sufficiently. Therefore, in case the interest rate has changed, the monthly charges will not fluctuate much which is a comforting idea for most people.

Death risk insurance
A savings mortgage includes death risk insurance. Small part of the premium is used for this. In case of decease of the mortgagee, the insured capital will be used to pay off the debt (partially). Most mortgage providers oblige you to conclude risk insurance for the total life time of a mortgage. Our advisers know the differences between the conditions posed by different providers. Use this knowledge! Inform yourself.

Fiscal exemptions
Mortgages combined with a life insurance use a special fiscal exemption:
the so-called “fical exemption for capital insurance own house”. This exemption means that during 15 or 20 years, one can create a capital tax-free. No tax payment is asked over the capital built (it belongs to Box 1) and the capital yielded is tax-free. For 2006 the exemptions are € 31.900 and € 108.600 resp., in total € 140.500. The exemptions are once-only per insurant and apply also when the insurance yields in case of decease. Are you married or living together? In that case you may count with twice the amount: € 281.000.  The condition is that you must have paid the premium during 15 or 20 years without interruptions and that the highest annual premium cannot be more than ten times the lowest annual premium. Each year these amounts are being indexed.

Special constructions
Life insurance mortgages can also be concluded with special constructions for the payment of the premium. The most common constructions are the high-low premium payments and the premium deposit. Do you want more information? Please ask our advisers.