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Your mortgage and interest relief

In the current tax system, your income is allocated to three different boxes:
  • Box 1:
In Box 1, according to the tax table, all income from employment, benefits, pensions, business, and owner-occupied property is taxed.

If you have not yet reached the state pension age, the following rates apply in box 1 in 2022:
Disk
Taxable income
Percentage
1
up to €73,031
36,93%
2
From €73,031
49,5%
  • Box 2:
    Taxable income from a ‘substantial interest’. You have a substantial interest if you hold at least 5% of the shares in a BV or NV.
  • Box 3:
    In Box 3, taxation takes place on your assets. Your net assets consist of your possessions minus your debts.

Mortgage interest relief

You can deduct the interest on a mortgage taken out for the purchase, maintenance and/or improvement of your own home from your income in Box 1. The so-called ‘own home allowance’ is deducted from the mortgage interest paid. In almost all cases, the owner-occupied property allowance amounts to 0.45% of the WOZ value of your home.
The amount of mortgage interest relief depends on your income and the tax band in which the mortgage interest relief falls.
Example:
Suppose your income is €35,000. You have €5,000 in deductible mortgage interest each year, and the notional rental value is €900 (0.45% × €200,000, the WOZ value of the property). The net tax deduction is €4,100. The value of the tax deduction is calculated as follows:
  • €4,100 against 37.07% = €1,519.87
For anyone in the highest income tax bracket, the rate at which mortgage interest can be deducted will be reduced at an accelerated rate. In 2022, mortgage interest can still be deducted up to a maximum of 40%, and from 2023 onwards, up to 37,10%.
The reduction in the tax allowance is offset to some extent by a gradual reduction in the notional rental value. In 2022, the notional rental value will be 0.45%.
The costs of obtaining the mortgage can be deducted from your income in Box 1 once, in the year you take out the mortgage. The main deductible costs are:
  • Mortgage deed costs;
  • Valuation fees;
  • NHG guarantee fee;
  • Early repayment charge levied when refinancing a loan;
  • Advice and mediation fees.

You are buying your first home

You can deduct the interest on a loan for a maximum of 30 years.

When you purchase your first home, you can only deduct mortgage interest if you take out an annuity mortgage or a linear mortgage.

You are buying another property or you are changing your mortgage

If you took out a mortgage before 1 January 2001, then the 30-year term for that loan with that amount entered into on 1 January 2001. For new loans, a new 30-year term will always commence.
From 1 January 2013, new mortgage rules came into effect. However, for people who owned a home with a mortgage on 31 December 2012, there is a Transitional law.
If you are moving to a different property, you can transfer your current mortgage type to your new home. The lender will assess your options at that time in accordance with the applicable mortgage lending rules. If you have an existing savings mortgage or bank savings mortgage, you may carry this over into the new mortgage (see: tax-neutral continuation). For example, almost all lenders apply the rule that you may borrow up to 50% of the market value of your new home on an interest-only basis. If you need a supplementary mortgage, you can only claim mortgage interest relief if you take out an annuity mortgage or a linear mortgage.
the Transitional law also applies when changing your mortgage and if you sell your home and buy a new home in the same calendar year or the following calendar year at the latest.
When you sell your home at a profit, you must include the (taxable) capital gain in your new mortgage. In effect, the taxable capital gain reduces the maximum mortgage debt. This scheme is called the re-lending regulation.