Are you a director-shareholder (DGA) considering purchasing a home? Then it is worth knowing that, as a business owner with a limited company, you are not necessarily reliant on a traditional bank. You can also take out a mortgage through your own company. This can be financially and fiscally advantageous, but it also requires careful planning. In this blog, we explain how a mortgage via your limited company works, what you should consider, and how we at Brand Boekhouders can support you.
Why consider a mortgage via your limited company?
A mortgage via your company means your BV lends money to you, the DGA, to purchase or renovate your private home. Instead of paying interest to a bank, you pay interest to your own company. That might sound appealing because the interest stays within your business. However, strict tax and administrative rules apply.
What are the advantages?
- The interest remains within your business. You pay interest to your BV, which the company Jcan book as income. Under certain conditions, this interest is also deductible against income tax (box 1), which may offer a tax benefit.
- You have more control. As long as the terms are commercially reasonable, you can set your own conditions for the term, interest rate, and repayment.
- It offers flexibility. In some cases, it is quicker or easier to arrange a mortgage through your BV than through a traditional bank.
What should you take into account?
- Changes in tax benefits
Mortgages via a BV have long been fiscally attractive compared to borrowing from a bank. However, recent changes to tax rates make this less certain. In 2024, mortgage interest relief in box 1 is capped at 36.97 percent, while the combined corporation tax and box 2 tax can exceed 50 percent. It is important to calculate whether this setup is still beneficial in your specific case. - Administrative requirements and businesslike terms
A loan from your BV must be structured on commercial terms. This includes a market-rate interest percentage, a written loan agreement, a notarised mortgage deed, and a realistic repayment plan. The repayment plan should be annuity-based or linear and must not exceed thirty years. If these terms are not met, the Dutch Tax Authority may reject the arrangement. This can result in the loss of mortgage interest deduction. - The Excessive Borrowing Act
Since 1 January 2023, the Excessive Borrowing Act has been in effect. It states that a director-shareholder and their fiscal partner may borrow up to €500,000 from their BV. Any amount above this limit is taxed in box 2 as deemed dividend income. To determine whether this limit has been exceeded, all debts to the BV are included, except for mortgage debt on a main residence that meets specific conditions.
If the loan was issued after 31 December 2022, a registered mortgage in favour of the BV is required for the exemption to apply. If the mortgage already existed before that date, a transitional rule applies. In that case, a mortgage registration is not required. This exception also applies if the home is sold and the same loan amount is used for a new main residence. Keeping a clear and complete loan administration is essential. This is especially true for property-related loans, in order to comply with the law and avoid unintended tax consequences. - Mortgage partly via the BV and partly via a bank
Sometimes a combination of funding through your BV and a bank is the most practical solution. For example, this may apply if your company does not have enough liquid capital to fund the full mortgage or if the bank offers a lower interest rate for a reduced loan amount.
It is important to note that in this setup, both the bank and your BV lend directly to you as a private individual. The bank usually registers the first legal charge. As a result, the BV comes second in any recovery situation. This can affect the interest rate your BV may reasonably charge.
When is a BV mortgage a smart move and when is it not?
A mortgage via your company can be attractive, especially if there is sufficient liquidity available. Whether it is the right option depends on several factors, such as tax rates, your financial position, and the structure of the loan. At Brand Boekhouders, we are happy to support you. We help assess the fiscal and financial impact, ensure correct bookkeeping, and advise on the best way to balance personal and business assets.
Why choose Brand Boekhouders?
- We provide clear tax advice and calculate whether a mortgage via your BV is fiscally beneficial.
- We offer strategic guidance and help find the right balance between salary, dividends, and loans.
- We deliver complete support, including year-end figures, financial forecasts, and a compliant administration.
Would you like to find out whether a BV mortgage suits your situation? Feel free to contact us for personal, no-obligation advice. We are happy to think along with you.
