Rent out a house with a mortgage

Partially renting out your house in 2020, 2021 or 2022 with permission from the bank means extra income and the opportunity to pay off your mortgage little by little. But renting out can also have consequences for the mortgage interest deduction and the bank must agree. Sometimes permission from the municipality is required. Is renting out your own home with a mortgage still financially beneficial? What does it really benefit you? A calculation example to calculate the minimum necessary rent provides more clarity about this.

Renting out your home, what does it cost?

  • A house with a mortgage is often expensive
  • Rent out your own home with bank approval
  • Temporary rental with the Vacancy Act in hand
  • Rent out your own home if you still live there
  • How high should the rent be in 2021 and 2022?
  • Conclusion: renting out a house with a mortgage in 2020, 2021 and 2022
Frequently Asked Questions
Can I rent out a home that has a mortgage?

If you want to rent out your home with a mortgage, approval from the mortgage bank is required. One bank will not find rental a problem, while another bank will not approve rental. The bank may sell your home without approval.

Can I rent out part of my home?

If you want to rent out part of the home in which you live, you also need the bank’s approval. There are also financial consequences. Renting out part of the home may mean that you will also pay wealth tax.

How much rent can I ask?

It depends on how high the rent may be. If you have a home in the private sector, there is almost no limit on the rent that can be asked, the rents there are free. In the social rental sector there is a maximum permitted rent at which the tenant can still apply for housing allowance.

A house with a mortgage is often expensive

Even though you can take advantage of the mortgage interest deduction, in many cases a house with a large mortgage is expensive. Especially if you have now bought another house. You will then have double housing costs and that can be quite expensive, even if you are still entitled to a double mortgage interest deduction for both homes. In those cases, the idea of renting out the first house and thus reducing monthly costs is tempting.

Rent out your own home with bank approval

Renting out your own home with a mortgage is not easy. The bank with which you took out the mortgage will have to give permission for rental. In many cases, the bank does not give this permission, because a tenant in our country often cannot simply be evicted. Moreover, rental often leads to damage to the property and no one wants that. But yes, the extra income from rent can be attractive to you and if you rent out a house while you no longer live there, at least there is someone to look after the house.

Temporary rental with the Vacancy Act in hand

Sometimes a temporary rental of an empty home is allowed by the bank, because it makes it easier for a tenant to be evicted. Temporary landlord under the Vacancy Act offers even more advantages. There is a transitional arrangement that stipulates that after the period of temporary rental under the Vacancy Act, the mortgage interest on the house is also deductible again. This deduction does not apply during the rental period, but it can easily return later. You happy, bank happy. You do need a permit from the municipality for this.

Rent out your own home if you still live there

If you rent out part of your own home while you still live there and you rent out more than one room, permission from the bank is again required. In this case too, the bank will not easily cooperate and you cannot invoke the Vacancy Act, because the house is not empty. If you are lucky that the bank does not find renting a problem, then you will find the tax authorities partly in your way. The tax authorities require that you divide your house into two parts when filing your income tax return:

  • A part that ends up in box 1 of the income tax;
  • A part that ends up in box 3 of the income tax.

This operation means that you will lose part of your mortgage interest deduction, namely the part in box 3 of the income tax. This also means that you must consider whether the additional income from rental outweighs the loss of mortgage interest deduction.

How high should the rent be in 2021 and 2022?

You can calculate yourself how much your rent should be, but keep in mind that if your rent is not above the liberalization limit of 750 in 2021 and 763.47 in 2022, the rented part must be of sufficient quality and have sufficient points according to the housing valuation system. In addition, each part, looking at the surface area and insulation offered, receives points that enable a maximum permitted rent and no more than that.

Example calculation of minimum necessary rent

The assumptions are that your mortgage is 200,000 euros, the mortgage interest is 2%, your house is worth 300,000 euros and that you have a partner. It is then assumed that you rent out your entire home and have an income at 37.35% tax. If you rent less, for example half, you multiply the whole by 50% with a small adjustment for the rental value and mortgage interest deduction. The sum is then as follows for 2020:

  • With full rental, the mortgage interest is entirely at your expense (no mortgage interest deduction), which will cost you 4,000 euros.
  • In box 3 you pay 0.6% capital gains tax on 100,000 euros of excess value plus 6,200 euros due to the debt threshold for a box 3 loan, minus approximately 62,000 in joint exemption, or 0.6% on 44,200 euros. That is 265 euros per year.

This means that your total costs are equal to 6,265 euros per year. That is approximately 525 euros per month. In this case, your minimum rent must be 525 euros per month plus any municipal charges, maintenance costs and insurance to break even.

Conclusion: renting out a house with a mortgage in 2020, 2021 and 2022

The above calculation indicates that renting out the house that is for sale can be beneficial. You can also calculate the minimum rent that must be. Other assumptions may also yield a different result in your case.

read more

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