When you buy a newly built property there are different issues to consider than with the purchase of an existing property. Aandacht Hypotheken has particular expertise in financing newly built properties and can clearly explain concepts such as bridging loans, building interest or loss of interest. We can also clarify other costs incurred during the construction phase and will be happy to assist you in calculating the best mortgage form to fit your requirements.
“Beware:
The general rule for mortgage interest deduction may not be applicable in your circumstances. Your entitlement will always need to be personally assessed“
Offers
We always have access to special offers for newly built properties from various financiers. This can consist of reduced interest rates, a reduction in the completion fees or a comprehensive package for newly built properties with attractive extras.
Costs during the production phase
The main difference between buying new and existing property is that new property incurs costs before you can start to live in it. We use two concepts for this: the building interest and the mortgage interest during the construction phase. You usually also have to start paying premiums for the new life insurance contract or repayment instalments for the new mortgage.
Building interest
In a new construction project the contractor often incurs costs which are not immediately repaid by the future owners. He calculates these costs as building interest and charges them to the buyers. This interest is calculated over the cost of the land and any already completed building phases (if construction has started).
The total sum payable in building interest can be divided into two sections: building interest incurred before you sign the preliminary sales contract (usually at the estate agent’s office) and building interest that is calculated over the period between the signing of this contract and the signing of the final deeds with the solicitor.
The first amount is considered part of the purchase price. The amount itself is not tax deductible, but can be financed as part of the mortgage.
The second part of the building interest is viewed by the tax authorities as financing costs. The fiscal treatment is the same as for mortgage interest. This interest is tax deductible in the first year of payment, but if you finance it as part of your mortgage, it will not be deductible in consecutive years because interest payable over interest would result in double deduction.
Mortgage interest
The new mortgage term commences as soon as you have signed the official ownership and mortgage deeds with the solicitor. You will start to pay mortgage interest during the construction phase. This interest is tax deductible in the year in which payment is made, and will continue to be deductible once you are living in your future home. For many people this results in double payments, because they are already paying rent or mortgage for their current home. Often you can finance this interest during the construction phase as part of your mortgage. The interest over this part of the mortgage does not qualify for annual tax deduction, as again it would be interest payable over interest, resulting in double deduction.
