Mortgage interest deductions: are you entitled to it?

Mortgage interest deduction: how does it work?

Mortgage interest deduction is a tax benefit for homeowners. Do you live in a property you own and have a mortgage on which you pay interest? In most cases, you are entitled to mortgage interest tax deductions. You may then deduct the mortgage interest from your taxable income. As a result, you receive a portion of your mortgage interest back. You can receive this amount back monthly (through a provisional refund) or yearly.

Notional rental value

If you own your own home, you also pay tax. It's called the ‘eigenwoningforfait’. In 2025, this amount was 0.5% of the WOZ value (the official valuation of a property). The eigenwoningforfait is first added to your taxable income. Then you can deduct your mortgage interest from this amount. This amount is often much higher than the WOZ value. The amount remaining is deducted from your taxable income.

How does it work? 

For a house with a WOZ value of €236 000 and interest paid of €5 300, the calculation at the Tax Administration looks like this: 

Income (€50 000) + 0.5% of the WOZ value (€1 180) = €51 180 minus the mortgage interest paid (€5 300) = income before tax (€45 880)

The tax you now pay is calculated on the adjusted income. The percentage of tax you pay also applies to your mortgage interest deduction. As a result, the person in the example receives approximately €1 500 back from the interest they paid. 

Good to know: there are other deductions and criteria that can increase or decrease your taxable income. As a result, the amount which you must pay or get back may be different. Do you have a fiscal partner? Then you always calculate the interest based on the highest earner.

Mortgage interest deduction by mortgage type

In addition to an annuity mortgage and linear mortgage, there are other mortgage types. But without the mortgage interest deduction, these forms are less attractive. The table below shows which types of mortgages entitle you to mortgage interest deductions, and which do not. 

How do you qualify for mortgage interest deduction?

If you take out a new mortgage, you are only eligible for mortgage interest deductions if you also pay off the mortgage principal. You must pay off the mortgage in full by the end of the term. And each year, you must keep to the repayment schedule agreed to in the contract. In practice, that means you can only choose between an annuity or a linear mortgage. You can still take out another type of mortgage, but then you won't be entitled to mortgage interest deductions in the Netherlands.

Other conditions include: 

• The house must be owner-occupied; you must live in the house
• You get a maximum of 30 years to deduct mortgage tax
• If you took out your mortgage earlier than 2001, you may receive deductions until 2031
• If you temporarily have two homes, or are divorcing, there are additional rules you can comply with to still get a tax deduction (in part).

Outstanding mortgage balance when buying another house

Did you buy your first house after 2012? Then the mortgage interest deduction we described above applies to you. If you want to move to your next owner-occupied home, then the outstanding mortgage plays an important role in determining your new mortgage. The outstanding mortgage balance is the mortgage debt at the time of selling your home, and the number of years you received mortgage interest deductions. The next mortgage is determined by this outstanding mortgage balance.

A simplified example:

You took out a €200 000 mortgage, of which you have paid €20 000. You had seven years of mortgage interest deductions. Applying for your next mortgage? Then you have about €180 000 of deduction, for the next 23 years. The advisor or lender also calculates this when closing the mortgage.

Increasing limitations on mortgage interest deductions

Mortgage interest deductions are always a hotly debated topic in the Netherlands. The government once proposed to abolish the scheme completely. This did not go through at the time because it would have put many people into financial trouble. But the mortgage interest deduction scheme has been gradually reduced over the years. 

How much income tax you pay is determined by how high your taxable income is. The higher your income is, the more tax advantage you have. The Tax Administration works with tax brackets for paying taxes: a different percentage for each bracket. These percentages also apply to your tax deductions.

The mortgage interest deduction for high-income earners has been reduced by the government for several years. For this income group, the percentage of deduction no longer equals the percentage of tax they must pay. This was scaled back each year to a percentage (37.56%) that applies to everyone in 2026.

What happens if the mortgage interest deductions are reduced further?

If the Dutch government were to abolish the deduction immediately and completely, the amount you now get back monthly (or annually) would fall away completely. In the example above, this would result in an increase of €125 per month in monthly expenses, or €1 500 per year. For people with higher mortgages, this has a significant impact, and would leave many people unable to afford their mortgages. In fact, the mortgage interest deductions are considered when calculating your maximum mortgage.

Therefore, we do not expect that the deduction will be completely abolished immediately in the Netherlands, but that there will be more limitations. What these limitations may be is not yet known. 

Low interest rate affects mortgage interest deduction

The low interest rates in recent years mean that you receive less mortgage interest deduction. If your fixed-rate period has expired or you've refinanced your mortgage, you'll likely receive substantially less mortgage deduction back. On the other hand, you also benefit from much lower monthly mortgage payments. 

Because there are not many tax deductions left at these low interest rates, we are increasingly seeing homebuyers opting not for mortgage interest deductions, but for the lowest expenses.

For example, they choose a form of interest-only mortgage (aflossingsvrij) that is not entitled to mortgage interest deductions. Because the mortgage capital isn’t paid off, the monthly payments are much lower. You can borrow up to 50% of the value of your home in an interest-only mortgage. You still must repay the other 50%; you can do this with an annuity or linear mortgage. But take note: Does your mortgage mature after 30 years? Then you still need to repay the 50% borrowed with the interest-only mortgage.

Transitional law for mortgages prior to 2013

Did you take out a mortgage with the right to claim mortgage interest deduction before January 1, 2013? Then your rights don’t change. The type of mortgage you took out at that time will remain the same. This is called the transitional law. So even if you move or refinance your mortgage, your mortgage will remain in its current form, and you will retain your mortgage interest deduction. Thinking of increasing your mortgage? Then the new portion is subject to the new rules. That part must be in an annuity or linear mortgage form. So the new rules only apply to new mortgages.