Video series: ‘Sofa talks’ about property – tips for first-time buyers and parents
This series sees experts at ABN AMRO answer questions from clients. On the sofa today: Judith van Summeren (Property Director, ABN AMRO) and Kees Adema (Wealth Planning Expert, ABN AMRO). In this episode, both experts zoom in on the topic of property and answer questions from first-time buyers and their parents. How can parents help their children to purchase a property? Can children save by borrowing from their parents? And can parents give a property as a gift?
Can my parents still help me to buy a house?
Kees: “Yes. Although the Dutch government has scrapped the €100,000 tax-free gift scheme for a home purchase, your parents can still gift you a one-off, tax-free amount of €31,000 if you’re under 40. They can also gift you up to €6,600 tax-free each year. If they want to gift you more, you as the gift recipient pay 10% gift tax on the amount above that threshold up to €152,000. If you receive more than that, you’ll pay as much as 20% gift tax on the amount above the threshold.”
Can I borrow money from my parents to buy a house?
Judith: “Whether you can borrow money from your parents depends on your personal situation. Many clients borrow some money from the bank as a mortgage and borrow extra cash from their parents. Money you borrow from your parents to purchase a home is known as a ‘family mortgage’ and is subject to different tax rules for mortgage interest deduction. You’ll need to repay the amount within 30 years as a linear or annuity mortgage, and your parents must charge you the going mortgage interest rate. One advantage of a family mortgage is that you may be able to agree on special terms, such as no penalty for early repayments. Most banks don’t offer that.”
Can my parents buy me an apartment?
Kees: “Yes. If they can afford to do that, great. Your parents benefit because they’ll have a rental property that earns them rental income. You benefit because you’ll have a – hopefully – lovely landlord or landlady (but you’ll still need to pay them rent). On the other hand, your parents will owe 10.4% property transfer tax and capital gains tax on the value of the property. This tax can be substantial. Another thing to check is the rules on renting property in your municipality. Some municipalities have strict policies in place. You can seek advice from the municipality in which you wish to rent the property.”
Can my parents gift me their home?
Kees: “Yes, your parents can gift you a home. However, you’ll need to consider various aspects such as gift tax and property transfer tax. It’s possible to gift a property at its ‘WOZ-waarde’ (what the property is worth according to the municipality), which could be lower than its market value. You may also qualify for a rebate on part of the gift tax if you pay both gift tax and property transfer tax. This is known as the ‘samenloopvrijstelling’. Gifts are subject to lots of rules. A good adviser can help you to understand all the legalities and tax implications.”
The information in this video is of a general nature and is not intended as personal financial or tax advice. Please contact your financial and tax adviser for advice that is relevant to your situation.
