When you want to buy a house without a mortgage, how does it go?

Buying a house is separate from any loan that you use to finance that purchase.If you have enough savings you can choose to pay a house and not to close a loan.

The meaning of mortgage is literally collateral.Buying a mortgage house means that you buy the house with borrowed money and that you give the house as collateral for the loan you are closing for. If you can no longer pay the interest or redemption of your loan in one way or another, the lender can sell the collateral to get his/her money back.

If you want to buy a house without a mortgage, then there are two options:

  • You have enough savings and do not need a loan for the purchase
  • You can borrow (part of the) money but without settling a mortgage right in front of the lender of the money; For example if you borrow from family

A house is a register well.That is to say that the property is kept in public registers (the Land Registry). Changing this property always runs through a notary. The notary verifies that the purchase/sale is correct, and also has the task of investigating foreign transactions, in order to prevent fraud and money laundering.

If you buy a house, you will never transfer the purchase price directly to the seller.The seller cannot change the registers, and in this way the legal property of the House would not be transferred to you. You go for the sale to a notary, and who will draw up a delivery certificate and register the ownership change in the Land Registry. You pay the agreed price to the notary, and that makes it to the seller once the delivery deed is signed. At the same time, the notary writes ownership to the purchaser.

The notary can, from his control function, ask questions about the origin of the money with which you buy the house.If you pay from a Dutch bank account there will probably be no questions (as the bank already has a control function). But if you pay cash or from a foreign bank account you can expect questions because the notary wants to know that the money is really yours.

The second option, borrowing money without having to settle mortgage law, you often see when people in a BV have earned a lot of money, but do not want to pay this out to themselves because they then have to settle the tax on it.You can then borrow from the BV to yourself as a private person. Another option may be that your family money lends to you to buy a house. Because the borrower and lender know each other well (or in the first case even the same person) there is often no official mortgage right in So鈩?N case.

Mortgage rights are also recorded in public registers, again by the notary, and that registration and the additional deed costs money.The legal certainty is very high, which is why it is so popular.

If you shut down such a loan without a mortgage, I would recommend that you include a positive/negative mortgage clause in it.This prevents the person who lends the money from using the house as collateral to include other loans. If someone is deeply in debt it becomes harder to get your money back ever.

  • A positive mortgage clause implies: the borrower of the money says that he/she will settle a mortgage on the lender’s first request in favor of the lender
  • A negative mortgage clause implies that the borrower promises that he/she will not use the house as collateral for other loans

If you are going to live in the house yourself, and you borrow money without mortgage law, then this does not affect the deductibility of the interest for the income tax.For the tax authorities it is only important that the loan is used for the purchase or conversion of a house, not whether there is a right of mortgage granted.

It is good to realise that if you finance your own home with your own money, and you want to convert that later to a loan (because you want to use your savings somewhere else for you), that at that time you will not deduct the interest for the loan as a deduction for the ink can increase the load.After all, you did not use the loan for the purchase of a house, because you already owned that house.

In the choice to finance a house with own money, it is therefore good to ask you if you can indeed miss that money in the long term too.Sometimes it can be more sensible to borrow anyway, if you can invest the money in a different way and by recovering income tax you have to pay less interest for the loan than you would earn with those other investments.

That goes exactly the same as buying a house with mortgage, with the big difference that the bank does not have to deposit the borrowed money into your bank account first, but you can transfer your money directly from your account to the seller’s account.

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