What is the new Dutch-style mortgage?
There is a new mortgage model coming to the UK soon which could make it more affordable to take out a mortgage for more people. This new mortgage model is designed to save the borrower money as well as reduce the risk to the lender. It’s a win-win for everyone!
This involves the interest rate coming down as the loan is being paid off. This means the borrower could save an estimated £5127 in interest if the LTV fell from 85% to 60% as stated on a National World report.
The Guardian offers this example, “if you buy a property for £200,000 and borrow £150,000, your LTV is 75%. If you reduce the mortgage debt to £140,000, your new LTV would be 70%. Assuming that at that point April Mortgages has a cheaper rate available at 70% LTV than at 75% LTV, it will automatically switch you on to the lower rate in which case you do not have to do anything.”
- This model is currently available to those who are re-mortgaging and is set to be available to first time buyers by early April this year.
- There will be no imposed early repayment charges if borrowers sell their home during the product term or if they make overpayments using their own money.
- Overall, you will be able to save money as you won’t have to pay back as much with this style of mortgage.
- Have a reduction in your interest rate as you pay the loan back.
This model will be a great option for all involved as the borrower is saving money as the interest rate decreases, equally, this reduces the risk for the lender as the value decreases.
The model originated in the Netherlands by April Mortgages in 2014. Since then, the firm has facilitated over 100,000 loans which has accumulated nearly £25.63 billion. They are now one of the top lenders in the country.
April Mortgages offer flexibility and reward their customers for their repayments as they fulfil their end of the deal.
In a National World report, we learn that “April Mortgages were authorised by the Financial Conduct Authority in October to offer loans for 15% deposits but is now planning to accommodate first-time buyers with 5% deposits by the end of March.”
Tim Hague is the director of the firm and speaks on the new model having been successful in the Netherlands after doubt and now the wish to bring his ideas to the UK is reality.
There are various types of mortgage models currently available in the UK which you can learn about here.
Are you interested in a Dutch-style Mortgage?