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Family loan mortgage purchase house

Purchasing a house in the Netherlands is done most of the time with a loan from a bank or insurance company. This mortgage is best arrange for via Expat Mortgages, as they are the experts to assist non Dutch with the mortgage application. What if your family has money and would like you to use this money for the purchase of your house in the Netherlands, how is that done tax wise?

In case your family lives abroad and would like to give to you an amount to use for the purchase of the house, then the gift tax (inheritance tax) is due in the country where your family is living. The Dutch gift tax act states that the gift tax is due in the Netherlands if the person giving is living in the Netherlands at that time. Your family lives abroad, hence no Dutch gift tax is due. The money can be transferred by bank transfer and you can use it to purchase the house.

Is it wise to do it like this?

Maybe yes, maybe no. What if you have brothers and sisters? Would they get the same amount of money, if not, then this can have a bad influence on the family relations. Can it be done otherwise? Yes it can.

You can loan the money from your family at an interest rate that does not need to be the same as the interest rate the mortgage bank would have charged you, it can be one interest point lower. The lower interest rate is the result of a court case in which it has been decided that in these relations there is no need to make the same profit on the interest as the bank is making. Moreover, the interest you pay (actually pay) to your family is tax deductible in the Netherlands, the same as is the interest you pay to the mortgage bank. More important is that the money has not been given to you, but loaned to you.

Your family can still decide to give you every year an amount. Small amounts, which can be given to brothers and sisters as well, reducing your debt to your family.

Please note that the tax office needs to be informed up front about this loan agreement. The details required are your Dutch tax number, start date of the loan, loan amount, the period of the loan and the repayment schedule.

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