You can leave your owner-occupied home for a rental home, but you also want to know what that means financially and whether everything is resolved. What happens from a tax perspective to the mortgage, debt and mortgage interest deduction of your own home as soon as you sell that home and choose to move to a rental home? What happens to the surplus value, residual debt or capital insurance when moving to a rental home and what is the role of the Tax Authorities in this?
Moving from your own home to a rental home
There may be many reasons to leave your owner-occupied home for a rental property. A few examples are:
- You find the risk and costs of owning your own home too great;
- You want something different;
- There is a forced sale;
- You find work in another city;
- You want to live smaller and find a good rental property;
- You want to use the equity in your home for other things.
Your owner-occupied home has a mortgage
If you are moving and the owner-occupied home to be sold or sold has a mortgage, the mortgage will have to be repaid at the time of transfer. If the house has excess value because the mortgage is lower than the sales value of your house, the debt can easily be paid off. If there is a residual debt, there are three options:
- Your house had the National Mortgage Guarantee NHG and you are eligible for cancellation of the residual debt;
- You have sufficient savings to pay off the residual debt;
- You take out a new loan to finance the debt.
The interest on the residual debt is tax deductible as mortgage interest for fifteen years and it is not important whether you move to a new owner-occupied home or a new rental home. After those fifteen years, the debt or what is left of it moves to box 3 of the income tax.
Moving to a rental home and additional loan scheme, the tax consequences
Anyone who buys a new owner-occupied home and had surplus value on the old home will have to deal with the additional loan scheme, which ensures that you must use the surplus value for the purchase of your new home. Anyone who moves to a rental home is free to spend the equity in their home as they wish. The caveat here is that it is best to stay in the rental property for at least three years if you use up the surplus value, because after three years of renting the additional loan scheme no longer applies to you. So if you want to buy a house again after three years, you can go ahead. You do not pay tax on the excess value.
Moving and capital insurance
A capital insurance policy or savings account for your own home taken out up to and including April 1, 2013 has the great advantage that you save for your house in a tax-advantaged way. You build up capital, have mortgage interest deduction and save tax-free at the same time. If you sell your house and you have a capital insurance policy for your home, in most cases the accrued capital will be paid out, taking into account your tax exemption. If you sell your home and move into a rental house, you may also have an exemption as long as you meet the condition that the highest annual premium or deposit does not exceed ten times the lowest annual deposit.
Temporarily from owner-occupied home to rental home
If you temporarily move into a rental house and then buy a new house, you can take out a new mortgage under the existing conditions of your old mortgage, but you will also have to deal with the additional loan scheme if the house was previously sold with excess value. The latter can be difficult if you have already spent the surplus value on other things. It is often also possible to rent out a vacant owner-occupied home, so that there is extra income.
Final move and mortgage
Anyone who moves to a rental home and sells their old house can spend the surplus value of their house on all kinds of fun and useful things, but it is best to stay in your rental home for at least three years and not opt for temporary rental. If there is any residual debt left, you may continue to deduct the interest on that loan for a maximum of fifteen years.
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