Family mortgage; what about it?
About one in six Dutch households with a mortgage uses a family mortgage. The vast majority of people with a family mortgage also have a mortgage with a financial institution such as a bank or insurance company. The family mortgage is then a (small) part of the total mortgage sum.
Tax benefit
If the family mortgage meets all the conditions that also apply to a regular mortgage, then the mortgage interest is tax deductible. However, the interest rate must be in line with the market. If the interest rate is too low, the tax authorities may regard the mortgage as a gift, which means that gift tax has to be paid. An interest rate that is too high is also not allowed.
Conditions
In addition to the market interest rate, the family mortgage must meet a number of other conditions in order to benefit from it for tax purposes.
- The family mortgage must be an annuity or linear mortgage. That means you have to make monthly repayments and the term is a maximum of 30 years.
- The terms of the family mortgage must be in writing. It is not mandatory to go to the notary, but it can be helpful to make sure everything is properly arranged.
Donation to children
"Parents who provide a mortgage to their children can choose to make an annual tax-free gift of the interest costs. This will be possible in 2024 up to a maximum of €6,633. As a result, the children effectively pay less interest, while receiving tax benefits through the mortgage interest deduction."
Raymond Naedenoen
Mortgage advisor at Alpina Roerdalen
Risks
Getting a mortgage from family or friends gives some extra financial room compared to traditional channels. This allows you to spend a little more money on a home, which is especially attractive to many people in this market.
But even a family mortgage comes with risks; it remains a financial obligation that you must meet. The Nibud has drawn up standards for the part of your income you can spend on housing. Check carefully whether all the financial obligations together are feasible in your personal situation.
Questions
Do you have questions about your mortgage or want to spar about your options? Then contact us, we will be happy to help you.
