Changes to Dutch mortgages in 2013

From 1 January 2013, the government's stricter mortgage regulations reduce the maximum funding level and restrict tax-free advantages to annuity and straight-line mortgages only.

For those who will buy their first house in 2013 the choice is clear. They can only receive a tax advantage by taking out a full annuity mortgage or straight-line mortgage. The choice is therefore limited to these two types of mortgages, whereby the annuity mortgage will usually result in the lowest expenses.

Persons who have bought a house in 2012 or before (whereby a purchase agreement was signed before 1 January 2013) can still take out interest-free and savings-based mortgages while retaining a tax advantage as long as the mortgage is not increased. 

The following rules apply to persons who already have a house and mortgage at present:
an interest-free mortgage can always be converted into an annuity or straight-line mortgage;
the final capital of current savings-based mortgages to be saved, and mortgages with a mortgage-linked endowment insurance (KEW), can be continued but not increased.

If a new house will be purchased, it is only necessary to choose between the increase of the mortgage for an annuity mortgage or a straight-line mortgage. 

Reduction in tax advantages
As from 2014 the annual tax advantage will be reduced by 0.5 percent every year for 28 years. This will result in a total reduction of the tax advantage by 14 percent by 2040. This reduction also applies to mortgages that were already concluded on 31 December 2012.

Another measure that refers buying a house is the reduction of the transfer tax, which was temporarily reduced from 6 percent in 2011 to stimulate the housing market. This rate will remain at the reduced rate of 2 percent. 

Maximum funding to be reduced
It is also important to note that the maximum funding will be reduced step by step to 100 percent of the purchase value of a house. At present the maximum funding is 105 percent. This percentage will be reduced by 1 percent every year until it reaches 100 percent in 2018. This means that buyers will have to put in some of their own money in the future when buying a house, particularly to cover costs associated with the sale, which total on average around 6 percent of the purchase price.

For more information on Dutch mortgages, read Expatica's guide to Dutch mortgages.

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