The Minister of Housing and Civil Service, Mr. Blok, has sent the Lower House an important clarification for the situation where a house encumbered by a mortgage before January 1, 2013, is rented out for the duration of a secondment abroad that commences after 2012. Once the seconded individual returns to the Netherlands to live in his or her house, the debt will again qualify as an existing mortgage debt under the transitional regime, which means that the annuity repayment conditions will not apply.

Transitional rules for existing mortgages as of December 31, 2012
As of January 1, 2013, the home-ownership rules were significantly changed. Mortgages concluded after January 1, 2013, are only deductible if they are annuity mortgages which will be fully repaid within 30 years. Transitional rules apply for the existing mortgages as of December 31, 2012. The new legislation only applies to mortgages concluded after this date. This means that the interest on other types of existing mortgages (for example interest-only mortgages) remains deductible.

House is transferred to box 3 for rental during secondment
If an employee is seconded abroad, his or her house is often rented out during the period of the secondment. As a result of the rental, the home and the debt are transferred to box 3. The value of the property when rented minus the mortgage is subject to the flat rate yield tax. This means that there is no current mortgage debt from then on.

A new mortgage upon return?
Under the new legislation a problem seemed to arise when a seconded employee returns to the Netherlands and moves back into his or her own home. The mortgage debt would then not be regarded as an existing mortgage to which the former legislation applies, but would instead be regarded as a mortgage entered into after January 1, 2013, to which the new legislation applies. This would mean that the mortgage interest deduction is only permissible for an annuity mortgage that is fully repaid within 30 years. The negative consequence of this is that returning expats who, for example, have an interest-only mortgage, must convert this into an annuity mortgage in order to qualify for the mortgage interest deduction.

Minister: the existing mortgage applies upon return
KPMG Meijburg & Co have pointed out this problem in the transitional rules. In his letter to the Lower House, Minister Blok has stated that the transitional rules that had been applied before secondment will apply again the moment that the individual returns to his or her own home. This means that the existing mortgage will once again qualify for the transitional rules upon return to the Netherlands and will therefore not be subject to the repayment condition. The Minister has resolved an important issue, which will henceforth ensure that existing mortgages will not have to be converted into annuity mortgages.