Many people do not have enough money to buy a house, which is why they often take out a mortgage from a bank. A mortgage is simply a loan, but a special type of loan where the house acts as collateral. The interest you pay on it is deductible in the Netherlands. For mortgages taken out on or after January 1, 2013, repayment is required to obtain this mortgage interest deduction. There are many different types of mortgages. It’s good to understand the various options and their conditions before taking out the loan. It’s wise to familiarize yourself with them before consulting a mortgage advisor. This prepares you for the conversation and allows you to ask the right questions.
Below is an overview of the most common mortgage types. Note: If you are taking out a mortgage for the first time, only the interest from the top two (annuity mortgage and linear mortgage) is deductible. Taksgemak can assist you with applying for mortgage interest deduction.
Annuity Mortgage
With an annuity mortgage, monthly payments remain constant throughout the term. A fixed monthly gross amount is paid, causing the paid interest to decrease over the years, while the repayment amount increases. The interest of the annuity mortgage is deductible. However, as you pay less interest and repay more over time, your net monthly expenses increase because the repayment is not deductible. The loan is fully repaid after 30 years.
Linear Mortgage
With a linear mortgage, you pay a fixed repayment amount each month. As the total debt decreases, so does the interest. Therefore, over the term, you end up paying less and less. As you pay diminishing interest, your net monthly expenses decrease. The interest from the linear mortgage is deductible. The loan is fully repaid after 30 years.
Interest-Only Mortgage
During the term of an interest-only mortgage, there is no need to repay the principal. This means that monthly expenses are relatively low, as only the interest needs to be paid and not any repayment. The interest remains the same throughout the term, so the annual mortgage interest deduction remains the same (without considering law changes). Here, a 30-year limit applies to the interest deduction entitlement. For new interest-only mortgages taken out after 2013, the interest is not deductible for first-time homebuyers. If you already had an interest-only mortgage before 2013, the interest deduction continues and you can even transfer it to another bank or take it with you when you move to another house, while retaining the mortgage deduction.
Savings Mortgage
With a savings mortgage, you only pay the bank interest, which is fully deductible. Additionally, you take out an insurance policy where you also save for repaying the mortgage. This policy often includes life insurance. A savings mortgage guarantees a certain repayment amount at the end of the term. Repayment happens all at once, at the term’s end. Monthly payments remain constant, unless there are interest rate fluctuations. The same 30-year deduction limit applies. Interest from a savings mortgage taken out after 2013 isn’t deductible for first-time homebuyers. If you already have one, the interest deduction continues as usual and can even be transferred or taken with you if you move.
Bank Savings Mortgage
A bank savings mortgage is similar to a savings mortgage, but you save on a bank account instead of through insurance. This usually results in lower costs than with a savings mortgage. For these mortgages taken out after 2013, interest isn’t deductible for first-time homebuyers. If you already have one, the interest deduction continues as usual.
Equity-linked mortgage
The equity-linked mortgage is like the savings mortgage but has an uncertain final repayment amount. Instead of saving, stocks are bought, and it’s uncertain how much they’ll be worth at the end of the term. No repayment happens during the term, and the monthly gross payment remains the same. The interest from this mortgage taken out after 2013 isn’t deductible for first-time homebuyers. If you already have one, the interest deduction continues as usual.
Second House
The interest paid on the mortgage debt for foreign real estate (not the primary residence) and a second Dutch house is not deductible.
Allow Taksgemak to manage your income tax return, ensuring your mortgage interest deduction and one-off deductible expenses are accurately included in your declaration.
