2013 Mortgage interest deduction
As of January 2013 a new law change comes into effect with respect to the mortgage interest deduction, double mortgage interest deduction and the exemption from capital insurance for the own home.
Mortgage interest deduction
The mortgage interest remains deductible, but from 1 January 2013 new loans must be fully repaid within the maximum of 30 years and must be repaid at least according to an annuity scheme in order to be eligible for the interest deduction. Below are the most important changes for the most prevalent situations.
Your first home
• The interest remains deductible. However, the loan must be fully repaid in 30 years and must at least be repaid according to an annuity scheme. This applies in particular to linear and annuity loans.
• For a repayment-free loan the interest deduction no longer applies. Even if saving simultaneously for the (partial) repayment after 30 years.
• In 2018, the maximum amount of the mortgage with respect to the market value of the property (known as Loan to Value (LTV) / ratio) may not exceed the market value of the property. The LTV is 100% in this case. The LTV / ratio is currently 104% plus the transfer tax. This percentage will be lowered in six equal stages from 2013.
Suze buys her first home in 2013. She is going to purchase her € 200,000 house with two loans, one of € 50,000 (Loan I) and one of € 150,000 (Loan II). Loan I is free from repayments while Loan II will be redeemed in annuity over 30 years. In this case the interest on Loan II deduct is deductible and the interest on loan I is not. If Susie had decided to repay loan I over 30 years according to the linear method (and still repay loan II over 30 years in annuity), the interest on loan I and loan II would have been deductible.
You are homeowner (and not moving)
• The existing loan interest deduction remains unchanged. Also there will be no changes for savings and insurance products associated with the loan.
• When transferring an existing loan (for example to another lender) nothing will change if no additional amount is added to the loan.
• If a loan is increased, for example for a renovation, an interest deduction only applies to the additional amount if the loan is repaid in 30 years and follows an annuity scheme.
Martin and Kees are in possession of a house on 31 December 2012, which has a repayment-free loan € 200,000. Martin and Kees undertook the loan in 2003. The 30-year period begins for them in 2003. They therefore have an 'existing loan' of € 200,000 for which 20 years of interest is further deductible. The loan does not need to be repaid in order to have the right to deduct interest. In 2018 the fixed interest period lapses. Martin and Kees decide after some deliberation to accept the new offer from their existing provider and fix the interest rates for 15 years. This has no tax consequences. Martin and Kees hold an ‘existing loan' of € 200,000 for which 15 years of interest is deductible. The loan does not need to be repaid in order to have the right to deduct interest.
You are a homeowner and buy a new house
• When transferring an existing loan in principle nothing will change if the amount of the loan remains the same (even if switching to another lender).
• When increasing the loan, the interest on the additional amount is only deductible if the loan is fully repaid in 30 years and is repaid at least according to an annuity scheme.
• Double mortgage interest deduction on the current home which is up for sale and the new dwelling is still possible in 2013, but the period will be reduced from three years to two years.
• For the new part of the loan, in 2018 the maximum amount of the mortgage cannot exceed the market value of the property (100%).
Marja and Wout are in possession of a house on 31 December 2012. On this house is a repayment-free home loan of € 350,000. Marja and Wout obtained that loan at the end of 2009. In 2009 the 30-year period for interest deduction lapses. Marja and Wout therefore have an 'existing loan' of € 350,000 for which 27 years are deductible without the condition that a loan of that amount must be repaid in order for interest deductibility to apply. In 2020 Marja and Wout sell their own home for € 370,000. In the meantime, Mary and Wout voluntarily repay € 10,000 on their repayment-free loan. At the time of sale, the amount of the loan is € 340,000. Marja and Wout realize a capital gain of € 30,000 (€ 370,000 / / / € 340,000), which, as a result of the additional loan will be considered to be ‘injected’ into their own new home. In the same year Marja and Wout buy a new own home for € 450,000. For this they may borrow € 420,000 tax facilitated and Marja and Wout do this. The purchase of the new property is financed through a loan for which € 340,000 comprises an 'existing loan’ for which 19 years of the right to deduct mortgage interest remains without the condition that a loan of that amount must be fully repaid in order to have the right to deduct interest on that loan. The remainder (€ 420 000 / / / € 340,000) is financed with a loan which must be repaid in 30 years according to an annuity scheme. Marja and Wout may therefore deduct the interest on this so-called 'new loan' of € 80,000.
Double mortgage interest deduction
The period that the double mortgage interest applies for properties still under construction or standing for sale is reduced from 3 to 2 years.
Exemption from capital insurance for the own home
For capital insurance on the own home and savings accounts homes (spaarrekeningen eigen woning) which are undertaken after January 1, 2013, the exemption from box 1 no longer applies.