A Family Mortgage: How It Works

A family mortgage is a home loan that you arrange with, for example, your parents or another family member. One in six households with a mortgage already makes use of this option. In many cases, it serves as a supplement to a conventional mortgage from a bank or insurance company. This can allow you to borrow a bit more or negotiate more favorable terms.

Tax Benefits

If the family mortgage meets all the same conditions that apply to a standard mortgage, the mortgage interest is tax-deductible. The interest must be at market rate. If the interest is too low, the Tax Authority (Belastingdienst) may consider the loan a gift, which could lead to gift tax being owed. The interest must also not be excessively high.

Requirements

In addition to charging a market-rate interest, the family mortgage must meet several other conditions in order to qualify for tax benefits:

The loan must be repaid using an annuity or linear repayment schedule, within a maximum term of 30 years.

All agreements must be documented in writing. This can be done informally between parties, but using a notary adds extra legal certainty.

Gifting to Children

Parents who provide a mortgage to their children can choose to gift the interest payments back to them tax-free each year. In 2025, this is allowed up to a maximum of €6,713. This reduces the effective interest burden for the children while still allowing them to benefit from the mortgage interest deduction.

Be Aware of the Risks

Taking out a mortgage with family or friends can offer more financial flexibility compared to traditional lenders. This may allow you to spend more on a home, which is very appealing in today’s market.

However, a family mortgage remains a serious financial commitment. You must be able to make repayments and pay interest. Carefully assess whether the financial burden fits your income. Nibud (the Dutch National Institute for Budget Information) offers guidelines on what is considered responsible for housing expenses. Make sure all your financial obligations are manageable in your personal situation.

Questions?

A family mortgage can be a smart solution, but it must be properly arranged. Do you have questions about your mortgage or want to explore your options? Feel free to contact us — we are happy to help.