Prevent residual debt by borrowing money

The number of houses underwater is falling. Yet 32% of the 4.3 million people who own home still run the risk of being left with a residual debt if they were to sell their home now. has more notes

Among homeowners younger than 35, no less than 75% have the problem that their mortgage costs more than their home are worth.

Worries due to residual debt

Worries due to residual debt

These younger homeowners bought their homes before or during the crisis. Even if you do not have immediate relocation plans, the potential risk of residual debt can cause you sleepless nights. Certainly, if you have taken out a mortgage on the basis of more than 100% of the foreclosure value of your home.

Save money by paying off your mortgage

Paying off your extra mortgage may then be a good idea. Not only for your peace of mind, but it can also save you money.

Different risk classes apply to mortgages. Is your mortgage in the class above 100% foreclosure value? Then you pay an interest surcharge. In some cases, this increases your interest by 0.3%. With a mortgage of $ 200,000, that means $ 600 extra interest per year.

Example of borrowing money for a mortgage


Some time ago I met Good Finance. In 2009 they bought their current home for $ 240,000. For this they took out a mortgage of $ 250,000, interest 5.4% fixed for ten years. They recently received a new assessment for the WOZ tax from the municipality with a WOZ value of $ 235,000.

Borrowing advice for a mortgage

Banks have been relying on market value since 2013 to determine the risk of a mortgage. 100% of the foreclosure value corresponds to approximately 90% of the market value. With the WOZ value as a starting point, this means 90% of $ 235,000 = $ 211,500.

My advice to this couple: take out a loan of $ 38,500. If they repay their mortgage with this, they will be placed in a lower risk class. That means a saving of 0.3% risk surcharge over the entire mortgage.

Take out a loan and save

Take out a loan and save

You can already take out a loan of $ 38,500 at an interest rate of 4.1%. This provides the following savings:

Old situation
Interest rate mortgage: $ 250,000 x 5.4% = $ 13,500 = $ 1,125 per month

New situation
Interest rate mortgage: $ 211,500 x 5.2% = $ 10,998 = $ 916.50 per month
Interest loan: $ 38,500 x 4.1% = $ 1,578.50 = $ 131.50 per month
Total interest charges per month: $ 1,048 per month

That means a saving of $ 924 per year. An amount that you can do many fun things with. But Good Finance mainly sleeps a lot better. Also because transferring a mortgage in a lower risk category is much easier. They may, therefore, save even more!

Take out personal loan advice

Of course, we make this calculation just as easy for you. Contact one of our Valmont specialists and discover how much you can save with taking out a loan.