Your next home
Do you currently own your own home and are you looking for your next home, maybe because your current home no longer meets your needs? This means you are a second time buyer on the housing market. As a second time buyer, you already have house-buying experience, so you’ve got a pretty good idea of what will happen. If you’ve never moved house, there are quite a few things that you’ll have to deal with. There’s also a good chance that the rules of the game as you know them have changed. On 1 January 2013, the housing market underwent a significant overhaul in terms of tax regulations.
In 2013, there were significant changes to the tax rules. This means that with all new mortgages, people can only opt for an annuities or linear mortgage in order to qualify for mortgage interest deduction. Did you have another form of mortgage on 31 December 2012, such as a savings, lifetime, investment or interest-only mortgage? Then, under certain circumstances, you can take it with you, without loss of mortgage interest deduction. This applies only to the part still outstanding. Anything extra that you want to borrow must be repaid via the annuity method in a maximum of 30 years (360 months).
Top-up loan scheme
Since 2004, second time buyers have to take the 'top-up loan scheme' into account. In short, this means that you have to use the equity or profit on your previous home for the purchase of your new home in order to be eligible for full mortgage interest deduction. If you don’t use the profit, you might not get mortgage interest deduction on the amount of the profit. An example: You have a mortgage of €150,000 and you sell your home for €200,000. So you make €50,000 profit. Your next home will cost €275,000 including purchasing costs. To be fully eligible for the mortgage interest deduction, you can only finance €225,000. You have to make up the remaining €50,000 (profit) yourself. Would you rather finance your entire home and use the profit for something else? Then you can only deduct the interest on € 225,000. There are exceptions; if you use the profit to do some renovation work, this part is also deductible, because you’re putting the money into your house.