Afdragsfrie

Afdragsfrie refers to a type of loan, most commonly a mortgage, where the borrower is not required to make principal repayments during a specified period. Instead, during the afdragsfrie period, the borrower typically only pays interest on the outstanding loan amount. This can lead to lower monthly payments in the initial phase of the loan.

This arrangement is often chosen by individuals who anticipate an increase in their income in the future or who wish to free up cash flow for other investments or expenses during the early years of the loan. After the afdragsfrie period ends, the loan usually converts to a standard repayment schedule where both principal and interest are paid. This means the remaining loan amount will be amortized over the remaining loan term, resulting in higher monthly payments compared to the afdragsfrie period.

Afdragsfrie loans are a common feature in some European mortgage markets, particularly in countries like Denmark. They can offer flexibility but also carry risks. Borrowers must be aware that the total amount owed will not decrease during the afdragsfrie phase, and the future payment obligations will be higher. Careful financial planning is essential to ensure the borrower can manage the increased payments when the repayment period begins. Lenders typically assess the borrower's ability to afford the higher payments after the afdragsfrie period concludes.