Family Mortgage: Borrowing From Your Parents to Buy a Home

In short

With a family mortgage you borrow money from your parents or another relative to buy a home, instead of (or alongside) a loan from the bank. The interest then stays within the family: you pay interest to your parents and they receive it instead of the bank. Under certain conditions you may simply deduct the interest from your taxes. By combining the loan smartly with an annual tax-free gift, you can increase the benefit even further.

What is a family mortgage?

A family mortgage, also called a family bank, is a loan between family members for an owner-occupied home. Often parents lend to a child, but it can also be between other relatives. You record the arrangements in a loan agreement: the amount borrowed, the interest, the term and how you repay. For the provider (your parents) it is a way to put savings to better use than a savings account; for you it is often favourable financing.

Deducting the interest: which conditions apply?

The interest on a family mortgage is just as deductible as on a regular mortgage, provided you meet the same rules that apply to mortgage interest relief:

• You take out an annuity or linear mortgage and repay it in full within a maximum of 30 years.
• The interest is at market rates: roughly equal to what a bank would charge for a comparable mortgage. The Tax Authority treats too high a rate as a disguised gift.
• You record the loan and the repayment in writing and report the details in your tax return.

Combine it smartly with a gift

The big advantage lies in combining it with a gift. Your parents may give you a tax-free amount each year: in 2026 that is € 6,908 per child per year. Many parents give that amount back as compensation for the interest you pay them. On balance you then pay little or no interest, while you may still deduct it. Keep it businesslike: the loan and the gift are formally separate.

What should you watch out for?

• Record everything properly. An agreement, preferably drawn up by a notary or adviser, prevents confusion and disputes with the Tax Authority.
• Consequences for your parents. The amount lent counts in box 3 of your parents' assets and can affect things such as benefits or the personal contribution for care.
• Treat children equally. If you lend to one child, consider the other children to avoid imbalances or problems with inheritance.
• What if something happens? Make arrangements for what happens to the loan in the event of death, incapacity for work or a divorce.

Family mortgage, acting as guarantor or gifting?

A family mortgage is different from acting as guarantor: with a guarantee your parents do not lend money but stand surety if you cannot pay. And it is different from a pure gift, where you receive the money and do not repay it. Which form suits best depends on your parents' assets and wishes and on your situation. An independent adviser helps you make the right choice. Request a free advice session.

Frequently asked questions

Is the interest on a family mortgage deductible?

Yes, if you meet the usual conditions for mortgage interest relief: you repay on an annuity or linear basis within a maximum of 30 years and you pay a market-rate interest.

What interest should I pay my parents?

A market-rate interest, so roughly what a bank would charge for a comparable mortgage. If you charge a much higher rate, the Tax Authority treats the difference as a gift.

May my parents give the interest back?

They may, within the annual tax-free gift of € 6,908 (2026). Many families use that room to keep the net interest low, while the interest still remains deductible.