Since 1 November 2013, ABN AMRO has been offering mortgage customers who owe more than their house is worth the option of paying down the underwater portion of their loan penalty-free. Unlike other banks, ABN AMRO offers all its customers with underwater mortgages this relaxed redemption regime, not just those who have received a tax-exempt gift of money to pay down the mortgage. This way, ABN AMRO can help more customers, including those who want to use their own savings to limit their risk of being left with negative equity.
Penalty-free redemption scheme available until 1 January 2015
To date, some 700 customers have taken advantage of this opportunity to pay down the portion of their mortgage that exceeds the so-called WOZ value (as determined for the purpose of the Dutch Valuation of Immovable Property Act). Early redemptions per mortgage averaged EUR 40,000. At the moment, around 25 per cent of ABN AMRO’s mortgage customers have an underwater mortgage. Early redemption improves the loan-to-value ratio and reduces or eliminates the risk of negative equity. For the time being, ABN AMRO has set the cut-off date for taking advantage of the penalty-free redemption scheme at 1 January 2015. The Dutch Consumers’ Association gave ABN AMRO an honourable mention on its website for its flexible approach to the issue of underwater mortgages.
Increase in early redemptions
Even if your mortgage isn’t in underwater territory, you can pay it down in part or in full before the end of its term. Early redemptions of up to 10% of the principal amount per year are penalty-free. Doing so has big advantages for you: lower monthly mortgage payments, a lower outstanding debt and less interest to be paid.
In 2013, one in eight ABN AMRO customers made extra mortgage payments, as opposed to one in ten the year before. The amount per customer averaged around EUR 11,000.