Depot Interest (Depotrente)

The key points in brief

Depot interest (depotrente) comes into play when you are buying a new-build home, or when you are planning to do so. It is linked to the construction deposit (bouwdepot) you can use to pay the costs of building the home. Based on the amount sitting in this deposit, you receive a certain rate of interest on the portion you have not yet spent on the build. That interest is called depot interest.

1. New-build homes and depot interest

A new-build home is generally purchased off the plan, meaning the actual home does not exist yet. That also means it is not yet possible to pay for the full property in one go. Instead, the costs of building the home are paid in stages.

The loan you take out to finance the build is placed in a construction deposit for two years. This way you can pay the contractor or property developer in instalments, based on a pre-agreed timeline. Initially you might only pay for the land, then the first floor, and eventually the complete home. You can already take out a mortgage for this, based on the purchase price of the land and the instalments you will be paying. Want to know how much you can borrow for a renovation? You can easily calculate your renovation mortgage.

2. Money in a construction deposit

The money you borrow from a bank or another mortgage provider goes into a construction deposit, a pot you can use to pay the invoices for the build. From the deposit account you can pay the bills for the construction of the home in line with the building instalments the contractor uses. From day one you pay mortgage interest on the loan you have taken out. The depot interest acts as compensation for the portion of the borrowed amount you do not yet need to pay to the builder.

3. Receiving depot interest

Once construction begins you will have paid only for the land, which means the largest part of the borrowed amount is still sitting in the construction deposit. You pay mortgage interest on the full amount. In return, you receive compensation for the money you do not yet need. That compensation is the depot interest. In effect, you only pay interest on the amount you have already spent on the build. This keeps the costs of the money in the construction deposit down, so your housing costs only rise gradually.

The depot interest rate is usually 1% lower than the mortgage interest rate you pay. The difference between the two is, however, tax deductible.

Frequently asked questions

What is depot interest?

Depot interest is the interest you receive on the unspent balance in your construction deposit.

What is a construction deposit?

It is a loan you take out for two years to finance the construction of your home.

How high is the depot interest rate?

The depot interest rate is usually 1% lower than the mortgage interest rate you pay. The difference is, however, tax deductible.