Real estate is becoming increasingly expensive, the need for long-term loans such as a 40-year loan is becoming more and more urgent. We can thus reduce our monthly burden, but is a 40-year loan also interesting?
Borrowing at 40 years
It is a general trend: the term of loans increases year after year. In the year 2012 about half of all people borrowed in 20 years, today loans at 30 or 35 years are almost ‘standard’. Since 2006 it is possible to contract loans with a duration of 40 years. Is this interesting?
Benefits of loans with long maturities
With such long loans you always have to pay attention, even though more and more people choose to borrow on long maturities. The advantage of a long-term loan is that the monthly expenses can be printed. This also means that a higher loan can be obtained and you can enjoy the tax benefit for longer.
Disadvantages loans with long maturities
Loans at 40 years are not that interesting because the costs are higher compared to other loans. The total cost price will therefore be higher, taking into account interest charges and the debt balance insurance. Borrowing a longer period also means a greater risk for the bank. She therefore wants to compensate for this risk.
Do not forget that after 30 years you will be required to carry out a new mortgage registration. This will also entail extra costs.
A final point of attention is of course the maturity itself. Anyone who takes out a 40-year loan risks soon to have to make repayments even after his retirement. If you know that the pension represents little, then asking for financial difficulties later in life. You may have the advantage of using the lower monthly payments to invest money wisely or to set aside for your pension, but unforeseen circumstances can still throw those plans into the water.
Reasons for loans at 40 years
It is very simple: Real estate prices are rising, making it harder and harder for young people to find an affordable home. Both apartments and houses follow this trend. A 40-year loan would then seem interesting: low monthly payments and the possibility to still be able to buy your own home.
If you look further at the complete picture, you will notice that the cost price is higher in totality. Consumentenorganisatie Test-Aankoop even recommended a loan at 40 years, for the reasons we already mentioned in this article.
Conclusion, borrowing to what term?
Are you planning to borrow for the purchase of a property? Then the general consensus is that this is best done at 20-25 years. You can also approach it more strategically and take out the loan for up to 30 years and make early repayments when it is more interesting than saving.
Borrowing at 40 years is generally not a good idea, especially if you have little margin left over.
However, a loan of 40 years does not seem that much. Not all banks even want to offer this. First try to play different banks against each other and then formulate your conclusions.
Another alternative could be to use a group insurance or IPT insurance as collateral, although this will most probably be the most interesting for a second home.