Today I will elaborate a little bit about how I was able to save roughly € 500 with a few clicks. It's only applicable for my Dutch readers, but the general principle is interesting nonetheless.
I am the happy owner of a student loan which I collected during my college period. I am obligated to pay it back in 15 years after a grace period of 2 years. Currently I am about halfway. The interesting thing though is that the interest part of this debt is linked to our government bonds and fixed for a period of 5 years. I just started a new period of 5 years for which my interest rate is.... 0,0%!! That's free money in my eyes :-)
The 2nd interesting thing is that we have the option to receive another grace period of 5 years (or multiple grace periods, for a total duration of 5 years). This gives me the option to stop paying back my student loan, and redirect this cash flow to my mortgage for which I have to pay about 2,5% interest. The real interest rate is a little bit lower however, because I get to deduct the interest payed with my income taxes. However, it's still a net saving and if I do this for 5 years straight, I will save about € 500.
Other advantages are that I might be able to receive a better rate when my mortgage period ends in 7 years because I have a better Loan-to-value. And if I die in the coming 5 years, my student loan will be cancelled anyway but my family still has the benefit of a slightly lower mortgage.
The only risk is that the interest rates will go up in 5 years. However, if I spend the money on extra payments for my mortgage I actually reduce the interest rate risk because my morgage has a higher interest rate and it has to be refinanced in 7 years anyway.
Just some random thoughts about my personal finance situation. I will post later about my goals for 2020 and the results for December 2019.
Do you have student debt? Do you want to get rid of it or would you consider delaying payments in order to boost your dividend income?
I am the happy owner of a student loan which I collected during my college period. I am obligated to pay it back in 15 years after a grace period of 2 years. Currently I am about halfway. The interesting thing though is that the interest part of this debt is linked to our government bonds and fixed for a period of 5 years. I just started a new period of 5 years for which my interest rate is.... 0,0%!! That's free money in my eyes :-)
The 2nd interesting thing is that we have the option to receive another grace period of 5 years (or multiple grace periods, for a total duration of 5 years). This gives me the option to stop paying back my student loan, and redirect this cash flow to my mortgage for which I have to pay about 2,5% interest. The real interest rate is a little bit lower however, because I get to deduct the interest payed with my income taxes. However, it's still a net saving and if I do this for 5 years straight, I will save about € 500.
Other advantages are that I might be able to receive a better rate when my mortgage period ends in 7 years because I have a better Loan-to-value. And if I die in the coming 5 years, my student loan will be cancelled anyway but my family still has the benefit of a slightly lower mortgage.
The only risk is that the interest rates will go up in 5 years. However, if I spend the money on extra payments for my mortgage I actually reduce the interest rate risk because my morgage has a higher interest rate and it has to be refinanced in 7 years anyway.
Just some random thoughts about my personal finance situation. I will post later about my goals for 2020 and the results for December 2019.
Do you have student debt? Do you want to get rid of it or would you consider delaying payments in order to boost your dividend income?
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