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The rules for mortgage interest deduction have changed significantly. This affects not only first-time buyers, but also homeowners with mortgages before 2013. What do you need to pay attention to and what new options are there?
For many elderly people, there comes a time when the house feels too big or stairs become a challenge. Even if you're still fit, an empty nest can make you think about your housing needs. Maybe you want a smaller, more comfortable home, a home in a green environment, or just back to the city. Sometimes your current home still fits well, but you have more wishes than your retirement income allows. Then you're actually looking for more financial space.
There are plenty of reasons to review the rules surrounding your mortgage, because a lot has changed when it comes to interest deduction. Here are four things to keep in mind.
Since 2013, you can only deduct interest for a mortgage that is fully repaid. This rule does not apply to loans made before 2013: thanks to the transitional law, you retain the right to a mortgage interest deduction.
Do you need an extra mortgage for your next home and do you want to deduct the interest? Then you must repay that loan in full within thirty years. Mortgages made before 2013 are excluded from this rule.
The right to deduct interest applies for a maximum of thirty years. From 2031, more and more interest-free households will notice a significant increase in their net costs. Discuss with one of our advisors whether you can deal with this.
New mortgages are subject to a 2013 agreement between lenders: you cannot finance more than half of the market value of the house without amortization. If you are moving and your current mortgage is completely or mostly amortization free, you will have to deal with this. This depends on the excess value of your home and how much you need to borrow. One of our advisors can make a calculation for this.
The transitional law also applies to savings or investment mortgages made before 2013, which you can take with you and retain your right to an interest deduction. Since 2017, you have been allowed to use your deposit for repayment without a waiting period, whereas earlier this was only possible after 15 years. Talk to one of our advisors whether this is wise, as it affects your tax deduction. These types of mortgages have specific benefits that you would lose if you repay or transfer.
If you want to change something about your mortgage, it is wise to do this before you're 57 to do. For example, if you are considering moving, renovating your home, or freeing up money to help your child find a home. Make sure you talk to us before this age, then there are more options. If you reach the state pension age within ten years, lenders must take into account your pension income, which is on average around 30% lower and limits your options.
Are you older already? Don't worry. Even then, there are still many new options available. Contact us and we'll be happy to tell you more about the new mortgage rules and senior mortgages.