Borrow money to buy land? Take this into account!

Buying land for building a new home may have become a lot less popular over the years, yet this does not take away the fact that today many people still prefer it.

 

When you choose to proceed with the purchase of building land, the chances are that you want to choose to borrow for this purchase as much as possible so that you have to take out less credit for the construction of the house. Is that interesting, however? A loan that is taken out for the purchase of land is not eligible for the home bonus. You will learn all about it in this interesting blog article!

Is borrowing for building land actually possible?

In the first instance, the question remains with many (rightly) whether it is or is not possible to borrow money for building land. In principle, it is possible to take out a mortgage loan for the purchase of building land. However, the fact that it can not mean that it is simple, on the contrary. In practice, it is often the case that banks are not exactly jumping for the granting of a mortgage loan with regard to the purchase of building land. How did that happen? Very simple. In the first instance, in this way only very limited guarantees can be provided by the borrower. That is different when it concerns a house, because then there is the right of pledge. This is much more complex with building plots. An additional disadvantage is that the people who already borrow for the purchase of building land can no longer receive additional financing for realizing the actual home.

What are the tax consequences?

In 2017, just under 10 percent of all loan applications for building land were expected to be approved. That is of course very little. In addition, it can also be established that the number of loan applications to borrow money for the purchase of building land has decreased considerably over the years. Here are causes for indicating, namely:

  1. More and more young people are choosing to purchase an existing home and renovate it;
  2. The fact that no claim can be made on the fiscally interesting housing bonus;

At the moment that you would like to borrow money for the purchase of building land, you should always take into account the financial consequences that this choice entails. An important point, for example, is the fact that by taking out a loan for the purchase of land, you are not eligible for the home bonus. That is of course the case when you purchase a home.

No living bonus when borrowing for building land

Just because there is no claim to the home bonus when a mortgage loan is taken out for the purchase of building land, the general advice is that you would do well to limit the credit amount for the purchase of building land to a minimum. . That is also not surprising, because the home bonus is good for a tax reduction of 40 percent on the purchase of a house on what interest, capital or debt balance insurance is paid. The maximum amount of this tax benefit is limited to 2,360 euros. In principle, this means that you can pay up to 944 euros less in taxes on an annual basis.

Added value tax on the sale of building land

Not only the less favorable tax conditions for borrowing money for building land are important to keep in mind. What about also the possible added value tax on the possible sale of your building land in the future? When you buy the building land separately and you sell it back after 8 years you can
face an (extra) painful load. The first 5 years there is a tax rate of 33 percent while it is in the next 3 years at 16.50 percent.

Conclusion; borrow money for building land or not?

After reading the information in this blog article, it should be clear that borrowing money for the purchase of building land is actually not interesting at all for practical reasons. In essence, you are already missing a lot of money because you do not have the possibility to deduct part of the interest on your mortgage loan from your taxes. In addition, at the moment that you may want to sell your building land back in the future, that can ensure that you have to pay a capital gain tax. This way you will not suffer a single financial loss, but only twice.

Apart from the above, it must also always be taken into account that if you already receive the mortgage loan for your building land, the chances are that you will no longer be able to borrow for the realization of your house on the building site in question. For both purchases you will have to be able to provide not inconsiderable income guarantees. All in all, it is therefore more interesting to bring in as much of your own resources as possible when purchasing building land. For example, you may be able to take out a mortgage loan without any worries for the realization of the actual home.