The interest deduction for residual debt financing will definitively stop. From 2018 it will be more expensive to finance a residual debt and the borrowing capacity will be smaller.
Residual debt arrangement not extended
State Secretary Nieves has decided not to extend the interest deduction for residual debt financing. This temporary crisis measure must keep the housing market moving. Homeowners can finance a residual debt advantageously, making relocation earlier possible.
Moving with a residual debt? Have your options calculated without obligation
According to the State Secretary, the housing market has recovered to such an extent that stimulation of the flow is no longer necessary.
- In 2012, when the crisis measure was introduced, only 117,000 houses were sold, compared to 215,000 at the end of 2016.
- The percentage of homes that are under water has fallen from 36% in 2013 to 18% in 2016
Residual debt financing still deductible
The scheme makes the interest for a residual debt financing deductible for a maximum of 15 years. This ensures a lower monthly payment. In addition, due to the interest deduction, the calculation of the borrowing capacity takes into account the actual costs instead of a notional test burden of 2%. This allows more to be borrowed.
Consequences of lapsed interest deduction
The consequences of the lapsing of the interest deduction for residual debt financing have been previously illustrated by mortgage consultancy firm NBG. She calculated that with a residual debt of € 25,000 the monthly charge will increase from € 141 to € 203. This homeowner is therefore € 61 more expensive per month.
The consequences for borrowing capacity are even greater. With an income of € 52,000, by taking into account the actual burden, a maximum of € 197,500 can be borrowed. However, if, after expiry of the deduction, the notional test burden is calculated, the maximum borrowing capacity drops to € 112,500.
This was a reason for mortgage adviser NBG to call for maintaining the interest deduction for residual debt financing.
Level before the crisis
Despite parliamentary questions and protest from interest groups, the State Secretary does not want to extend the residual debt arrangement. In a response, the Minister announced that at the end of 2017 the number of homeowners with a residual debt will be back to pre-crisis levels. In addition, the mortgage interest rate is still historically low. He sees no reason to stimulate the flow on the housing market.
For the 620,000 homeowners whose homes are now under water, this is a tough blow. They will have to highlight their relocation plans or take into account higher costs and lower borrowing capacity. Read more about the options for financing a residual debt.