You must state the family mortgage in the annual income tax return if you use it for the purchase or renovation of the owner-occupied home. This family mortgage does not automatically come into the picture with the pre-completed tax return, so you have to make a yearly calculation of the paid mortgage interest.
Family mortgage and the first money provider
As soon as you borrow part of the mortgage for your owner-occupied home in the form of a family mortgage, you must have permission from the first lender. The monthly expenses of the family mortgage also count towards the assessment of the maximum loan capacity. You can also agree that the charges associated with the family mortgage will be waived annually. You must then demonstrate this in writing to most lenders.
It is therefore possible to take out a different mortgage with a bank or insurer in addition to the family mortgage.
Higher mortgage with first lender
Some lenders are open to a mortgage application to treat the burden of a family mortgage ‘financing burden neutral’. As a result, more can be borrowed .
Family mortgage not only with purchase
Incidentally, there are several situations for which you can use a family mortgage:
The purchase price of your home including buyer’s costs is higher than the maximum mortgage that the bank wishes to provide to you;
You will partially repay the first mortgage at the bank to prevent a penalty interest, for example, this may also decrease the interest rate, a win-win situation;
You want to renovate the existing house and you want to borrow this extra money through your family.
The purchase amount is higher than the maximum mortgage
Banks can be careful about the amount they want to lend you. People think in terms of risk and payment problems. Obviously, there is legislation and depending on your situation, there is a maximum amount of mortgage that can be provided.
Suppose you or your child buys a home of € 300,000 and the maximum mortgage amounts to € 275,000, a gap of € 25,000 is created in the financing plan plus the costs of the buyer. This hole can also be financed through a family mortgage.
Partial repayment of existing mortgage
To take advantage of low mortgage rates you can get your mortgage refinanced . Sometimes this is accompanied by a towering penalty interest. Then you can use a family mortgage to simulate this transfer step by step and borrow the maximum amount you can redeem without penalty.
If you are allowed to repay 10% without penalty per annum, you can therefore ‘pass on’ your mortgage to a family mortgage in a 10-year period. Then you can also switch it again and then perhaps without penalty interest. That depends on the conditions of the family mortgage.
You can also come into a lower risk class with the first mortgage due to the partial repayment. Then a so-called risk storage expires and the knife cuts on two sides.
Which mortgage interest can you agree on?
There is no legislation for this and you can freely determine this as long as it is a business transaction. After all, the mortgage interest rates of Rabobank and ABN Amro are not always the same. Based on current case law, you can apply a margin of around 25% up or down. The moment you have an interest in the lowest mortgage interest you can make a comparison of a number of providers and eliminate the most expensive and cheapest lender and then calculate the average percentage.
A non-business mortgage is, for example, if an independent third party would not have provided this mortgage. For example, because the chance that this loan can be repaid in full is small.
If at any time you enter into a discussion with the tax authorities about the amount of the mortgage interest, it can consider the non-business mortgage interest as a gift and also tax it with gift tax.