Deductible mortgage expenses

Deductible mortgage expenses

It is quite straightforward. All expenses related to closing your mortgage are tax deductible. This includes the continued cost of mortgage interest, but also one-time expenses. 

If you refinance your mortgage, the associated costs can also be deducted from your taxable income. These expenses can be declared in your tax return as non-recurring expenses for your mortgage. 

However, expenses incurred to buy your home, not relating to the mortgage, are not deductible. So buyer’s agent, notary, title deed transfer, land registry (Kadaster) and bank guarantee fees are not deductible.

How much mortgage deduction do I get back?

The costs you incur to take out your mortgage are deducted from your taxable income. This will lower your taxable income; thus you pay less tax. The amount depends on your personal situation. To get an indication, use the percentage of the highest bracket of your income. Approximate tax return = mortgage costs x income tax rate. From 2023, the rate will be a maximum of 36.93% .

In the Netherlands, you pay a tax because you enjoy benefits from owning your own home. This is called the notional rental value (eigenwoningforfait) and is a percentage of the WOZ value (official property valuation), which is added to your income. The notional rental value ensures that you cannot deduct all the interest you pay. How does this work?

Which mortgage expenses are deductible?

We've listed the deductible mortgage costs for you:

• Appraisal fees: many mortgage lenders require a valuation report (taxatierapport) of your new home before you can take out a mortgage. This informs them if the house is worth what you are willing to pay for it. 
• Mortgage advice and closing costs: if you want to take out a mortgage, there are costs involved. The fees you pay your advisor can be deducted from the Tax Administration.
• Drawing up mortgage deed by the notary: the mortgage deed is the official contract stating that you, in exchange for receiving a loan, give your house as collateral. This is called the right of mortgage. 
• Application for National Mortgage Guarantee: if you buy a house with the National Mortgage Guarantee (NHG) you must pay fees for this. This is once-off 0.6% of the mortgage amount (in 2023).
• Fee for a mortgage quote extension: if your quote expires, the interest rate at that time may be higher than the rate in your mortgage quote. You can then have your offer extended for a fee. This is called the commitment fee (bereidstellingsprovisie). 
• Penalty interest: if you refinance your mortgagethe bank may charge you penalty interest. The bank does this when the interest rate on your current mortgage is higher than the current interest rate. If you co-financed the penalty interest in your mortgage, you may not deduct the interest you pay on it.
• Construction interest in newbuild home: the cost of construction interest in the period after the signing of the purchase contract of your newbuild home and before signing at the notary. 
• Ground lease: monthly or annual payments for ground lease.

Which mortgage expenses are not deductible?

The following one-time expenses are not tax deductible:

• Brokerage fees for the purchase of your home, such as agent fees.
• Transfer tax.
• Drawing up the deed of sale by the notary. However, the preparation of the mortgage deed is deductible. 
• Construction interest for the period prior to the conclusion of the preliminary sales agreement (newbuild only).

Mortgage interest deductions

There are quite a few deductible expenses that are once-off expenses. But the mortgage interest is paid throughout the term of the mortgage. The interest you pay on your mortgage can be declared to the Tax Administration and is also tax deductible. You get an annual statement from your bank for this, with exactly how much interest has been paid.

The bank also informs the Tax Administration of this amount. So it’s very easy, and you only have to check that it is correct on the tax return.  

The amount of the mortgage interest you get back depends on the percentage of tax you pay and the WOZ value of your home. This is because the notional rental value (eigenwoningforfait; a percentage of your WOZ value) is first added to your taxable income before the mortgage interest is deducted.

Monthly or annual tax returns?

You must always file a tax return once a year as a homeowner. You can usually do this from late February. Then (depending on your tax situation) you will receive a refund in June or July. 

You can also choose to declare your mortgage interest deductions monthly.