A new year means updated rules and requirements regarding buying a house and receiving a mortgage. In this article, we will discuss the most important changes which will come into effect as of January 1, 2018. If you are planning on buying a house, it may be wise to either succeed in doing so within the next couple of months or wait until 2018, depending on your situation.
This year is the final year that it is possible to partly finance the additional costs of buying a house and arranging a mortgage by lending 101 percent of a house's market value. For example: if you buy a house with a market value of 300.000 euros, it is possible to cover additional costs of 3.000 euros by receiving a mortgage of 303.000 euros.
As of January 1, 2018, the maximum mortgage will be 100 percent of the market value. This means that any additional costs will need to be financed with your own savings. The government stated that the 100 percent loan-to-value is the bottom line for the future, which means no further reductions will take place.
In 2017, homeowners in the highest tax bracket (income above 67.072 euros) can get a tax rebate for the paid interest of their mortgage at a tax rate of 50 percent. In 2018, this rate will be limited to 49,5 percent and in 2019 this will be 49 percent. This means the fiscal advantage will become lower.
Based on the plans of the new coalition, this reduction will accelerate annually from 2020 by three percent, which means that in 2023 the tax rebate will be similar to the lowest tax rate, which will be 36,93 percent.
Families with a double income can get a higher mortgage in 2018. Currently, the maximum mortgage is determined by calculating only 60 percent of the lower income of two salaries. This rule safeguards banks from interest and repayment problems should one partner’s income suddenly stop, meaning the couple will not be able to make their monthly payments.
In 2018, this maximum will increase from 60 to 70 percent, which means double-income couples can get, on average, 10.000-20.000 euros more for their mortgage.
The value estimated by the municipality for your main residence, known as the WOZ value of your house, will increase in 2018. The estimated increase is five to seven percent. Be aware that this will result in higher taxes imposed by the municipality on homeowners.
During the crisis, a special arrangement was created due to falling house prices. Many homeowners had an outstanding mortgage which was greater than the value of their house.
With this special arrangement, it became possible to finance the residual debt (mortgage value minus home value) in a “fiscal friendly” manner when you sold your house. People in this situation were able to deduct the interest payments from their taxable income.
This is still possible, however, if the sale of your home results in a residual debt, it should be transferred from the seller to the buyer at a notary before January 1, 2018.