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Residual debt – Immediately Borrow Money

If you have a residual debt, you can choose to finance it. But what is a residual debt and how do you calculate it? Discover our tips on financing your residual debt and how you can prevent it in the future.

What is a residual debt?

What is a residual debt?

 

Unfortunately, it often happens that we cannot sell our house at a profit. This creates a residual debt. In the Netherlands, 1 in 6 people has a residual debt, with an average value of 35,000 euros. The residual debt is therefore the negative balance that remains when you have sold your house. With the sale, it was not possible to overlap the debt amount of the mortgage with the amount that you had for your home.

Residual debt financing

Residual debt financing

 

Residual debt financing is becoming increasingly popular and more and more lenders are going to offer this. In this way, financing a new home becomes possible, despite the fact that the old home has not yet been repaid. There are two different ways in which you can finance the residual debt.

Withdrawal in new mortgage

The moment you take out a mortgage for your new home, you can choose to automatically finance the remaining debt in the new mortgage.

Consumer finance

In addition, you have the option of financing the residual debt through a revolving credit or a personal loan. Of which people opt for a personal loan in most cases. Are you not buying a new home but are you going to rent a home? Even then you can finance the remaining debt with a loan.

Best choice: personal loan

The best choice in your case will of course depend on your personal situation. But in general we prefer to take out a personal loan. The advantage of taking out a personal loan compared to a revolving credit or mortgage is that you know exactly where you stand. You borrow the amount you need to finance the residual debt on a one-off basis. You then pay a fixed monthly amount in repayment. In addition to knowing every month how much you have to pay, you also know exactly when you have fully repaid the loan

Calculate residual debt

Calculate residual debt

 

How do you calculate the amount of the residual debt? You do this by taking two factors into account: the selling price of the home and the amount of the corresponding mortgage. The residual debt is the difference between the selling price of the home and the (remaining) mortgage debt.

Example calculation

Suppose you have a townhouse with a mortgage of € 300,000. You then sell it at a loss for € 250,000. Then the remaining debt is: 300,000 – 250,000 = € 50,000.

How long to pay in residual debt?

How long to pay in residual debt?

 

The term of a loan that you take out for the residual debt depends on three factors.

1. Amount of the residual debt

The amount of the residual debt is different in every situation. This depends on the loss that you suffer on the sale of your property.

2. Monthly payment of the loan

Of course it is nice to have repaid the loan as quickly as possible. You can choose to set the monthly amount as high as possible. Please note that it must remain feasible to repay this amount every month. You want to prevent you from incurring a payment arrears on the loan because you have set the monthly burden too high.

3. Amount of the loan interest

If you opt for a personal loan, you pay a fixed amount each month on the outstanding debt. Part of this is interest payment, the amount that remains is repayment. The higher the interest, the less money remains each month to pay off the residual debt. In this way, a higher loan interest rate ensures that the repayment of the residual debt takes longer.

Remission of residual debt

Remission of residual debt

 

If you have purchased a house that falls under the National Mortgage Guarantee (NHG), you may be eligible for cancellation of the remaining debt. This is only possible if you cannot finance the residual debt in a new mortgage or take out a loan for it. You are also only eligible for the cancellation if you had to sell your house and you have done everything to limit the loss.

Interest deduction residual debt financing is canceled

Interest deduction residual debt financing is canceled

 

From 2018 the interest deduction for financing the residual debt has lapsed. This makes moving with a residual debt more expensive. A call has been made for the retention of the interest deduction, but unfortunately this has definitively lapsed. It was a temporary crisis measure. Only the residual debts that arose between 28 October 2012 and 31 December 2017 are eligible for interest deduction.

Prevent residual debt

Prevent residual debt

 

Of course you do not have a lot of influence on the selling price of your house. However, the amount of the residual debt can be steered yourself. You do this by paying extra during the term of the mortgage. With these extra repayments you reduce the mortgage debt.

It may be that the extra repayment may not always be free of charge, or that there may be a maximum amount per year. In that case you can choose to put the money aside and when you sell the house you can reduce the residual debt or even be able to pay with it. Always keep an eye on the changes in the regulations concerning this topic. Politicians sometimes want to implement legislative changes that may also apply to your situation. If you don’t feel like investigating this yourself, you can always ask a consultant for it. They are aware of all the latest legislative changes.

Tips for financing residual debt

Tips for financing residual debt

 

  • Ask a real estate agent to paint a concrete picture of the expected return on your home. This way you can prepare yourself for any residual debt.
  • Repay residual debt with savings. You may have chosen to save some extras when there was room for that. You can do that money now
    to finance the residual debt.
  • Pay residual debt from a loan. By taking out a revolving credit or personal loan, you do not have to use your own savings directly to finance the residual debt. By paying off the loan every month, you still pay off the remaining debt in installments.

Arrange residual debt financing on time

Arrange residual debt financing on time

 

It is extremely important to have the financing of the residual debt on time. Arrange this before your home is transferred to the new owner at the notary. At that time, the entire mortgage, including residual debt, must be repaid. If the money for this is not yet available, then the property cannot be transferred either. This has financial consequences for you as a seller.

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Loan or shares for biotech company?

For companies it is often a question of whether money will be borrowed or whether it will be brought in by issuing shares.

Increase of the share capital

Increase of the share capital

The well-known biotech company Doomung from Leiden also recently faced this consideration. At the shareholders’ meeting of May 24, 2017, the company planned to announce an increase in share capital. Now Doomung has been a startup for years, so investing in shares of this company entails matching risks. The share capital would be further expanded with 150 million units to a total of 950 million units.

Financing with the help of a loan

Financing with the help of a loan

Of course it was not a voluntary choice for the company to issue additional shares. Doomung needs extra money to meet its obligations. But suddenly another choice was made. The debts of the company will be financed with a new loan. That loan amounts to 100 million dollars and is provided by Orbimed Advisors. This globally operating investor mainly invests in medical companies. The agreement with Orbimed Advisors will run until June 2021.

Saving on financing costs

Saving on financing costs

Doomung can use this money well, because it only recently bought back the commercial rights of the drug Ruconest that it developed. Doomung is doing well, because although the company may still be called a startup, it has been around for 30 years. Doomung recorded an eight-fold increase in sales in the first quarter of this year. It was a historic quarter in which the company achieved a positive operating result for the first time. With the new loan, Doomung is saving enormously on its financing costs and can further exploit the commercial success of Ruconest.

More confidence in the share

More confidence in the share

Now that Doomung does not have to issue additional shares, but instead takes out a loan, its share capital does not continue to be diluted. This gives existing shareholders more confidence. The share price on the stock exchange also rose by 3.5 percent. Due to the large number of shares in circulation due to earlier dilution, the value per share is only 0.35 euros.

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Borrow money for a one-time purchase?

Sometimes you want or have to do a large expense and prefer to pay it in one go without running out of your savings. Consider, for example, buying a new car, making a planned trip around the world or furnishing a baby room. You can choose to borrow money once. That way you can directly realize your dream.

Personal loan

Personal loan

The personal loan is the most chosen when it comes to one-off financing. You borrow the amount you need in one go and receive it directly on your account. This way you can make your one-time purchase. You then pay a certain amount in installments each month. You choose a monthly amount that you think you can pay off. The lender will calculate for you whether this is a responsible amount in your situation.

The major advantage of a personal loan over a revolving credit is the certainty that this form of loan offers. For example, with a personal loan, the loan amount, the term and the interest are fixed. This prevents you from borrowing more than you actually needed. You also know in advance exactly when you will have repaid the loan in full, because you also fix the term of the loan. And finally, you cannot be surprised by rising interest rates. This is fixed during the term of your loan.

Did you know that: the average loan amount for furnishing a home is € 12,500?

Revolving credit

Revolving credit

In addition to the personal loan, you can also opt for a revolving credit. This offers just a little more flexibility than a personal loan. It can be the financial support or just that little bit more freedom that you need temporarily. If you opt for a revolving credit, you agree a credit limit with the lender. That is the maximum amount that you can withdraw. Now with a revolving credit it is possible that you can withdraw the repaid amounts. You decide when and how much money you withdraw. And you only pay interest on the amount that you actually borrowed. The term is not fixed, so there is no fixed deadline by which the loan must be fully repaid.

Borrowing money on purpose

Borrowing money on purpose

When you have a new car in mind, you prefer to buy it immediately and pay it off at the dealer so that the car becomes your full property. A good option is to borrow the one-off amount of money that you need. Be careful not to take hasty decisions and not take the first loan that seems interesting. You will also have to take the time to compare different lenders. You do this by requesting quotations and putting them side by side. Do you have a specific offer that you would like to agree to? Then read the obligations and risks of this one-off financing carefully again. This way you avoid signing for something that you will regret later.

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Can I pay extra? | Repay loan

When you take out a loan, you also want to know in advance whether you can repay the loan in whole or in part. Are fines still attached to this or can this be done free of charge? In this article we will tell you everything you need to know about (accelerated) repayment of your loan.

Extra repayments in the meantime

Extra repayments in the meantime

Paying extra in between is always a good idea. You ensure that you pay off the loan faster than agreed. In other words; you shorten the term of the loan. By shortening the term, you pay less interest in retrospect and the loan is therefore cheaper. You also reduce your monthly expenses, leaving you with more money for something else.

Repay the revolving credit earlier

Fixed some extra repayments on your revolving credit ensures that you have repaid the loan earlier. You can make additional repayments with a revolving credit throughout the entire term. If you still need this amount repaid? Then you can record it again. Of course you should not continue doing this endlessly, you will never get rid of your revolving credit.

Paying extra on a revolving credit is always free of charge. You only pay interest on the loan amount instead of on the total amount of the loan. If you pay extra, the lender cannot earn less than expected.

Repay your personal loan earlier

You can repay extra on your personal loan by reporting this to your bank. The nice thing is that immediately after you have repaid extra your monthly expenses will go down. And it is just a nice idea that the debt that is still outstanding at the bank is already somewhat lower. Please note that you may not withdraw your repaid amounts, so you have ‘lost’ this money.

Nowadays, paying off the personal loan can be free of penalties almost everywhere. Do you choose to pay off your personal loan faster and to shorten the term? This means that the bank can charge interest for the borrowed money for less than expected. Do you decide to pay off the entire loan in one go? Then you have to take into account that the amount to be repaid is the loan amount excluding interest. After you have repaid this loan amount, contact your bank. They calculate for you how much you still have to pay in interest. If you have also transferred that amount, the loan is fully repaid.

How do I pay off my loan earlier?

How do I pay off my loan earlier?

You can make extra repayments on your loan in various ways.

  1. Repay via your digital banking environment.
    This is a personal and secure environment where you can manage your banking affairs from the comfort of your home. To make additional repayments, look for the ‘Repay immediately’ link.
  2. Pay off via iDEAL.
    If you do not like using your personal banking environment, you can also choose to pay directly via iDEAL. This option is often offered on the website.
  3. Repay by bank transfer.
    If you do not like both options, a transfer is a good alternative. The IBAN number to which you need to transfer the amount is clearly stated on the website and / or bank account. Do not forget to clearly state your contract number and name with the transfer.

How long does it take for a repayment to be processed?

How long does it take for a repayment to be processed?

It is difficult to say exactly how long it will take before an additional repayment is processed. This is because the processing time differs per bank. In general, repayments are processed within a few working days. This is also visible in your online banking environment. That way you can easily check whether the extra repayment went well.

Buffer left

Buffer left

Are you thinking about paying extra? First check with yourself whether you can really miss the money. It is important to always have a buffer available for unforeseen issues such as a broken car or dishwasher. It would be annoying if you could not have the repair carried out immediately because you had repaid too much of your loan with that savings.