Note: consider the repayment holiday option for your (family) mortgage

In case a donation, in the form of the so-called “jubelton” (a tax-free donation of about €100,000 made before 2024 from parents to their child(ren) for purchasing their own home), or in the form of the one-off increased tax-free donation of €31,813 (2024), was made, we would like to draw your attention to the possibility of taking advantage of what is known as a repayment holiday. This implies that, as a result of a large initial repayment at the start of the repayment term, there can be a period of several years during which no repayments need to be made on a (family) mortgage while still maintaining the right to mortgage interest deduction.

To make us of the repayment holiday, a (family) mortgage should be provided for the amount including the amount of the one-off donation or “jubelton”. Then, the child uses the received donation or “jubelton” to partly repay the mortgage. This creates a repayment-free period while maintaining eligibility for mortgage interest deduction, provided that the other conditions for this deduction are met.

Example
Mom and dad are shareholders of company X. In 2022/2023, a donation in the form of the “jubelton” (€106,671) was made to their daughter for the purchase of a house. In 2024, the daughter purchases a house for €500,000. She is able to obtain a mortgage of €250,000 from the bank. To support their daughter, mom and dad decide to lend the remaining amount from company X. Daughter needs €143,329 (€500,000 - €250,000 - €106,671) to complete the purchase, but instead, company X provides a mortgage loan of €250,000 (€143,329 + €106,671). One month later, the daughter repays €106,671 on her loan from company X. As a result, she does not need to make any repayments on her loan from company X for the coming years, while maintaining her right to deduct mortgage interest on the initial loan of €250,000 (as well as on her bank mortgage).

Since parents often support their children to purchase a house when the children are just at the starting point of their careers, the children may not yet be able to bear the additional repayment obligations of such a family loan. After all, there is a reason why the bank does not finance the entire amount. By taking advantage of the repayment holiday option, the financing becomes more in line with the child’s carrying capacity during the first years of the child’s career.

Note: During the repayment holiday, interest payments continue to be due. However, you may choose to make the financing even more manageable by making additional donations within the annual parent-child exemption of €6,633 (2024).

We are happy to discuss your specific situation during a personal meeting.

Team Family Business