2023-12-08 12:52:39
Away with the jubilee, long live the family mortgage. Because even after the abolition of the jubelton, people with rich parents have a strong advantage compared to those who want to buy a house on their own. Thanks to the family mortgage, a loan from parents to their children. This is also extra favorable because of ‘remarkable’ rules about mortgage interest deduction. Family mortgages even involve more money than the jubelton, two economists from De Nederlandsche Bank (DNB) note.
The jubelton, the option for parents to donate a maximum of 100,000 euros tax-free to their children for the purchase of a house, has already been partly abolished and will disappear completely on January 1. An evaluation showed that this arrangement increased inequality between young people with and without wealthy parents. And those who have more money thanks to this jubilee will also spend more, so the scheme further drove up house prices.
DNB now warns about exactly the same effects when it comes to the family mortgage. With such a mortgage, home buyers do not borrow from the bank, but from family or friends – usually from their parents. Home buyers often use that money to supplement a regular mortgage.
Homebuyers with wealthy parents trump others
Thanks to this family mortgage, home buyers with wealthy parents can trump less wealthy competitors in the housing market. For example, they can more easily overbid, and the DNB figures also show that they indeed buy more expensive houses, on average about 50,000 euros more expensive than others. They are also able to buy a house at a younger age than others, according to the DNB study.
A few years ago, mortgage providers pointed out the family mortgage as a nice alternative to the jubelton, but that turns out not to be necessary. The DNB figures are for 2020, and at that time 645,000 households already used such a family mortgage, one in six of all home buyers. That year, 1.2 billion euros were involved, compared to ‘only’ 700 million euros in donated jubilee barrels.
The total value of family mortgages now amounts to 70 billion euros, 10 percent of the entire mortgage debt in the Netherlands. “A surprising amount,” says housing market analyst Jasper Du Pont. “This perpetuates the lopsided growth.”
With a family loan, the official lending standards, drawn up by the budget institute Nibud, can also be set aside. These standards are intended to eliminate the risks of excessively high loans, but home buyers with a family mortgage still borrow a higher amount in almost one in five cases. “You can assume that banks pay attention to the risks that households run due to excessive lending,” says Du Pont. “This excess lending also increases the difference in opportunities on the housing market.”
Receive interest deduction, but do not pay interest
And then the rules also contain an ‘unintended and ineffective’ advantage for those who have such a family mortgage, DNB shows. The interest that the home buyer pays to his parents can be deducted from the taxable income, just like with any other mortgage – as long as that interest is ‘in line with the market’. But the parents may then donate that interest to their children. They then receive interest deduction, even though they pay no interest.
This tax benefit mainly benefits wealthy households, the DNB economists note. They refer to an interdepartmental official working group that called this construction ‘remarkable’ last year; that working group wanted to initiate a discussion about its ‘social desirability’. The DNB officials already suggest abolishing the interest deduction on family mortgages.
Also read:
IT professionals: Jubelton could be abolished earlier than 2024. ‘Set that 100,000 in your systems to 0, and you’re done’
Young home buyers with wealthy parents can benefit from the jubilation for another two years. Abolition faster is not possible, says the Tax Authorities. IT people doubt that.
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