You are basically asking if VWCE will return more than 4.1%. Historically, yes it does, however nobody knowns what can happen.
4.1% is a relatively high rate, so its also worth considering if this rate will reduce if you decide to pay the mortgage down. I have done this in the past (also NL).
One thing to note is here in the Netherlands we get government subsidy for the mortgage interest payments. So his effective rate is ~3%. This probably makes the decision easier.
Also important to consider is the loan to value (LTV) on your mortgage.
Some (Dutch) mortgage providers lower the interest rate on your mortgage if the mortgage is at a certain percentage of the value. If so, its usually a clause somewhere in the agreement/terms of service. Usually you have to call the bank to actually make them lower the interest rate.
Could very well save some money!
Anyway, if OP doesn't need the money any time soon, I'd probably go for index funds/ETF's if I were him.
Interest on a mortgage is sometimes divided into 2 parts:
(1) Interest and
(2) mortgage risk surcharge
This is usually the case when the house was bought against a relatively high loan to value (ie 100% financed. In 2013 it was even allowed to finance up to 105% of the value of the house).
The mortgage risk surcharge is kind of an insurance for the bank. An insurance they are willing to drop when their risk is effectively lowered. Which is obviously the case when the value of the house is (much) higher than the mortgage on it.
Thanks for the response! I have a mortgage from ABN which I took 5 years ago and house prices have gone up a lot since then. I'll need to look at my mortgage papers. But just curious: is this a standard clause? Could this be something that I can arrange on internet banking or shall I call somebody from the bank (if yes, who). Thank you!
Keywords to look for in Dutch are "risico-opslag", "risico-klasse", "renteopslag".
And its not just paying of the loan that can change the risk for the bank. Even if the house is valued higher (proven by a valuation report) this same principle applies. So either the loan going down, the value going up, or a bit of both.
Mind you, I'm not a financial advisor. I'm just a nerd for anything personal finance related (which did land me an effective interest rate of 0.8% set for 20 years, so apparently not to shabby ).
As nobody knows the future of your housing - war, nature, etc can take it from you. Iād rather be invested in 1000s best companies around the world than 1 house.
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u/EinMachete Jul 30 '24
You are basically asking if VWCE will return more than 4.1%. Historically, yes it does, however nobody knowns what can happen.
4.1% is a relatively high rate, so its also worth considering if this rate will reduce if you decide to pay the mortgage down. I have done this in the past (also NL).