Mortgage loan interest deduction

There is a mortgage loan on most owner-occupied homes in the Netherlands. Because few can finance the purchase price of a house itself. Banks take out loans themselves. They then lend that money back to, among others, homeowners. But for what, what belongs: In return you pay them interest. This mortgage loan interest is again deductible from your income. That way you pay less tax on your income. Some call it a ‘subsidy on living’. It is therefore a tax advantage that every owner of the house eagerly uses.

Meaning mortgage loan interest relief?

We call this advantage the mortgage loan interest deduction. From 2019, this deduction will be phased out. The conditions for “mortgage loan interest refund” have also changed since 1 January 2013. For example, with interest-only mortgage loan forms, you can no longer apply interest deductions from 2013 onwards.

mortgage loan interest deduction conditions

What conditions do you have to meet in order to qualify for mortgage loan interest deduction? In total you have to meet no less than 6 conditions. So there are a lot of them. Without this deduction, many homeowners would immediately have to sell their homes. The maximum interest deduction on mortgage loans is no less than € 0.50 per € 1 of interest paid. As said, the deduction of mortgage loan interest is not self-evident. You must meet all kinds of conditions. We take the four most important conditions in a nutshell with you below.

Maximum deduction mortgage loan interest is 30 years

If you are entitled to apply the mortgage loan interest deduction, you are entitled to deduct up to a maximum of 30 years. If, for example, you lend 300,000 euros to a home, you may deduct the interest you pay on the mortgage loan for 30 years from the tax.

Only valid with annuity mortgage loan or linear mortgage loan

Have you taken out a mortgage loan after 1-1-2013? In that case, the mortgage loan interest deduction applies to you only if you have a linear or annuities mortgage loan. With every other form of mortgage loan you are not entitled to an interest refund. With other forms of mortgage loan that were taken out before 1-1-2013, the interest deduction applies.

Remaining debt? The mortgage loan interest is then also deductible

Do you have a residual debt on your property? Make sure that you have this debt credited before 1-1-2018 in your mortgage loan. Only in that case is the mortgage loan interest deductible up to 50%. The number of years that can be benefited from interest deduction on residual debts is limited to 15 years. This makes you more or less obliged to repay this debt within 15 years.

Penalty for the transfer no longer deductible!

If you transfer a mortgage loan while the end date of your current mortgage loan has not yet expired, you will pay a fee to your current mortgage loan lender. We call this a transfer fine. In certain cases, the fine is deductible. But if you decide to co-finance the transfer penalty with your new mortgage loan, the penalty interest will not be tax deductible again.

How much does the reduction in mortgage loan interest deduction cost?

Now that the mortgage loan interest deduction will be reduced from 2019, you are curious how much this will cost you. In 2018, the deduction for interest on mortgage loans will not be affected yet. Only from 2019 onwards will the interest deduction for homeowners be reduced to 36.9% in small steps. Every year, 3% of each year goes off. Of course, this money will cost. But how much does the reduction in mortgage loan interest cost you annually?

New tax system

At the moment, the amount that you may deduct from your tax is still dependent on the level of your income. People who earn a lot can therefore receive more mortgage loan interest from the tax authorities. The maximum rate at which you may deduct the interest on your mortgage loan has already been reduced to 50% since 2014. From 2019 only 2 tax rates remain in the new tax system, namely a high rate (49.5%) and a low tax rate (36.9%). In 2023 the level of the mortgage loan interest relief is equal to the lowest tax rate. Taking a mortgage loan on a home will therefore be considerably more expensive from 2019 onwards. However, home owners are compensated by the reduction of the ‘house rental value’. At the bottom of this page we will go deeper into this compensation.

Calculate your mortgage loan interest deduction

A loan advisor can calculate the expected mortgage loan interest deduction for you. The amount of your income always determines how much tax you pay. The mortgage loan interest you paid in a year, which is deducted from your taxable income (note: the taxable income from work!). Thanks to this interest deduction scheme, you therefore pay less tax.

mortgage loan interest deductible on second home?

Unfortunately for you the mortgage loan interest is not deductible on a second home such as a holiday home or chalet.

Refund of mortgage loan interest per month or annually?

With mortgage loan interest relief you can reduce your taxable income. You will then pay less tax. You can include the mortgage loan interest in your annual tax return IB (Income Tax). Then you will receive a part of the tax authorities back in the spring. But you can also get a part of the tax every month. You can easily arrange this with the provisional refund of income tax. The Tax and Customs Administration checks at the end of the year, based on the annual declaration, whether you have received the correct amount.

Reduction of the notional rental value to alleviate the pain

The reduction of the mortgage loan interest deduction can have annoying consequences for some homeowners. The Dutch government also realizes that. That is why the Cabinet also introduced a reduction of the notional rental value with effect from 2019. What is the notional rental value? That is a percentage of the house value that is added to your income. You pay income tax on that percentage (0.75% in 2017). The notional rental value will be reduced to 0.6% with effect from 1 January 2019. As a result, you pay slightly less income tax and that should ease the, for some, painful lowering of the mortgage loan interest deduction.