It’s hard to make the right decision for your mortgage with so many different mortgage rules. The mortgage rules become more complex if they change once in a while.
The maximum ratio between the market value of the house and the mortgage (also called Loan-to-value)) decreases from 101% to 100% with effect from 1 January 2018. Therefore, the maximum mortgage will be equal to the market value of the home.
Lenders have decided that borrowing capacity could be increased due to the decreasing interest rates and the changes in income tax brackets. As of 1 January 2018, the income of the least-earning partner contributes 70% to the determination of the maximum mortgage (Loan-to-Income). In 2017, the lowest income of two-income households still included 60%. It may be wise to borrow less than the maximum allowed so that more money remains available, for example, to buy furniture, a hobby or a holiday.
Maximum Loan-to-Income increases for homes with energy-saving measures
You get a higher Loan-to-Income (LtI) if you earn € 33.000 or more gross per year if you buy a home with renewable energy systems or take energy-saving measures with the mortgage in their home. Examples are solar panels, roof insulation or heat pumps.The maximum extra loan amount is € 9.000.
1. The coverage of NHG increased to € 290.000 in 2018. More expensive homes are, therefore, eligible for NHG. For investments in energy-saving facilities, the coverage increases from € 15.900 to € 280.900. This investment needs to be in energy-saving facilities.
2. Since 2018, it is no longer mandatory for a mortgage with NHG to apply for life insurance. So NHG gives you the freedom to decide how to deal with the financial risks of passing away.
Mortgage interest deduction at a decreased tax rate
Box 1 (taxable income from work and home) currently has a four-bracket system, while it will have a two-bracket system in 2019.
The first bracket will have a rate of 40,85%. This bracket applies to income up to approximately € 68.600.
The second bracket will have a rate of 49,00%. This income bracket applies to income of more than € 68.600.
If your income is in the highest bracket, a lower mortgage interest deduction applies – even now. The tax rate for mortgage interest deduction is now being decreased in steps of 0,50% per year.
The tax rate for mortgage interest deduction will decrease in steps of 3% per year from 2020. As a result, it will be equal to the basic rate of 37.05% in 2023.
Decreased notional rental value for owner-occupiers
The tax authorities will return the proceeds from the lower tax rate for the highest incomes to all homeowners by reducing the notional rental value. Most homeowners have to add 0,75% of the WOZ value to their income in box 1. That percentage gradually decreases to 0,60%. The percentage is 0,70% for 2018. Except for the part of the WOZ value above more than € 1,080,000. That addition is 2,35% and stays 2,35%.
Box 3: increased tax exemption for assets
The tax exemption in box 3 is € 30.000 in 2018. The tax exemption in box 3 is increased to € 30.360 in 2019.
If you have a fiscal partner, you claim double the amount. So € 60.000 in 2018.
Contact us if you have any questions about your financial situation. See what you know and where you can improve your mortgage approach so you make an informed decision about the terms of your mortgage.
