When buying a house, you usually consider getting a mortgage from a bank or a mortgage lender. Another option is to borrow from your parents or relatives, known as a family mortgage.

A family mortgage works just like a regular mortgage. However, it differs because it involves borrowing money from family members or relatives rather than a financial institution like a bank. You agree with your loan provider on certain terms, conditions, and understanding between family members involved in the lending and borrowing. A family mortgage can be a compelling option that can benefit everyone involved.

There are the benefits of receiving donations from family:

A family mortgage works similarly to a traditional mortgage, but it offers key benefits for first-time homebuyers. One major advantage is negotiating mortgage terms with family members, providing more flexibility. Additionally, the money remains within the family, making it a more sustainable financing option.

Example of family mortgage calculations

Suppose you borrow €200,000 from your parents to supplement your mortgage when purchasing your first home. In this case, you make monthly repayments to your parents, just like with a standard mortgage.

Since a family mortgage often involves large amounts of money, there are risks that you cannot oversee:

Because of these risks, seeking a mortgage advisor's advice before drawing up an agreement is crucial.

A family mortgage could often offer a lower interest rate than a traditional lender. This can result in lower monthly payments, making it easier to manage the mortgage and saving money in the long run.

For example, if the current market interest rates are between 3.5% and 4%, you could agree with a family member on an interest rate between 3% and 3.5%. It’s important to note that the interest rate should still be competitive with the current market rates.

A family mortgage can cover the entire cost of your home, but you can also choose to take only a portion of the loan as a family mortgage. Like a typical mortgage, you can deduct the interest from a family mortgage on your tax return if you meet these three requirements:

Like a bank, your family members must report each year on the money you have repaid and the interest you have paid. This info must be shared with the Dutch Tax Authorities. You must pay the interest and mortgage repayment; you can't escape it through forgiveness.

Parents or other family members can provide a financial gift to support a home purchase instead of providing a family mortgage.

When arranging a family mortgage, it is recommended to visit the notary to prevent any disputes in the future. The agreement should outline key details, including the interest rate, loan amount, repayment period, and repayment method.

Emma and Tom want to buy a house for €420,000. They want to borrow €380,000, and their parents, living outside of the Netherlands, agreed to help them with a family mortgage of €40,000. With their parents, they decided on a 30-year loan, a 3.5% annual interest rate, and monthly annuity payments covering both interest and repayment.

You can combine a family mortgage with a bank mortgage. The bank will consider both loans when assessing your ability to repay, ensuring your total monthly payments fit within your financial capacity. It’s important to inform the bank about the family loan, and while not required, formalizing the family mortgage with a notary is highly recommended for legal clarity and protection.