Parents can help with the mortgage, for example with a donation or by giving a guarantee. A mortgage with the help of parents has benefits for both child and parent.
Starters in a difficult position
Anyone taking out a new mortgage in 2019 or taking out an existing mortgage cannot borrow more than the value of the home. This means that you have to bring more of your own money when you buy a house.
This puts starters in a difficult position. They are at the beginning of their career, also with income and savings. In addition, buying is attractive and sometimes the only option. Fortunately, parents can help with the mortgage
Helping parents with mortgage
Currently, 7 out of 10 parents help with the mortgage by providing a guarantee or with a donation or loan for the mortgage. We discuss the 3 options:
1. Parents donate for the home or mortgage
Parents can donate a limited amount tax-free to their child every year. In the case of a gift that is used for the home, this gift exemption is more extensive. In 2019, parents may donate tax-free up to € 100,800 for the purchase of a home.
For the exemption, the beneficiary must be between 18 and 40 years old. The gift exemption also applies to the repayment of the mortgage, the collection of a residual debt or maintenance and improvement of the home. Read more about the donations for home and mortgage.
2. Parent and child take out a family mortgage
With a family mortgage, the child borrows part of the purchase amount from the parents, instead of the bank. Together they agree on an interest for this, which is tax deductible under certain conditions. If the parents thereby (partially) donate the mortgage interest back, this is not included in the calculation of the maximum mortgage.
With a family mortgage you can borrow more at a lower monthly payment. Parents pay less tax on assets by investing in the mortgage for their child. In addition, they receive an interest that yields more than the low savings interest of this moment.
Read more about the family mortgage with a calculation example in which the loan-donate construction is explained.
3. ‘Guarantee’ for the mortgage | parents draw along
Until recently, parents could guarantee their child ‘s mortgage . This means that if he or she cannot pay the monthly payment, the parents take over. With a guarantee, lenders were willing to take out a higher mortgage if the income of the child is not (yet) sufficient.
Because a lot went wrong when parents act as guarantors, banks no longer offer this. Instead of this, ‘co-signing of parents’ has taken its place. Parents who sign the mortgage deed are also liable for the mortgage if the child can no longer pay it. In addition, conditions are set for the maximum period of the guarantee and the part of the mortgage that you must be able to bear yourself.
To help draw on the mortgage deed, the parents are also investigated whether they have sufficient financial resources. These requirements are different for every lender. Calculate your options without obligation.
Win-win situation for parent and child
Starters have difficulty finding a home. The supply of owner-occupied homes is falling and demand remains high, with rising house prices as a result. With a mortgage with the help of parents you have a better chance on the housing market. If you take a smart approach, you also reduce your future monthly payments.
It also has several advantages for parents. They pay less tax on their assets and gifts. It is also possible to achieve a higher return on capital. Interesting with the current savings interest! In addition, it is interesting to invest in real estate. A return on capital is also achieved with a family mortgage.
Get your options calculated
Not every lender offers the opportunity for parents to help with a mortgage. You must also ensure that you fall within the applicable tax rules to prevent an unexpected tax assessment. In doing so, it is important to carefully record the chosen solution to prevent any discussions.
It is therefore advisable to use a mortgage adviser for this. This starts with a calculation of the options for parents to help with a child mortgage.