Your guide to Dutch mortgages
Buying a home in the Netherlands? Here's a step-by-step guide on how to secure a mortgage in the Netherlands.
The Dutch government has encouraged home ownership for many years, offering tax exemptions on mortgage payments alongside other benefits for homebuyers in the Netherlands. Additionally, no restrictions are placed on foreigners buying Dutch property, even foreigners classed as non-residents, and securing a Dutch mortgage (hypotheek) is facilitated by mortgage lenders that offer specialised expat services, such as English-language mortgage contracts.
However, following the 2008 financial crisis regulations were tightened, making it harder for some people to get a Dutch mortgage – although expats are typically not affected if they earn attractive salaries. However, like everywhere else, the self-employed may now find it harder to get a good deal as banks consider entrepreneurs to be more risky.
As the Dutch housing market continues to show signs of improvment, expats should weight the benefits of buying a Dutch property and securing a Dutch mortgage in a country where home-ownership is the norm, with owner-occupied properties making up some 60 percent of the total housing stock.
Dutch mortgage updates 2016-2017
- From 2017, the Loan To Value ratio (LTV) will decrease by 1 percentage point, which means a lower percent of the amount you can borrow against the value of your home.
- Your maximum mortgage amount is not only be based on the LTV ratio but also your income. From 2017, the income of your partner will have a greater effect in determining your loan maximum limit, increasing your buying capabilities as a couple.
- In 2017, the government-set mortgage limit will be reduced by 1 percentage point to 101 percent of the property purchase price; although, while this is the legal limit, most banks are still reluctant to offer more than 80–90 percent of the property value.
Should you rent or buy a propery in the Netherlands?
In the five years following the onset of the financial crisis, property prices in the Netherlands plummeted more than 20 percent and left many homebuyers with mortgages that exceeded the value of their Dutch property. However, the Dutch housing market upswing that started mid-2013 is predicted to continue through 2016, as the Dutch economy and consumer confidence improve and interest rates remain at historical lows. These conditions have turned the Dutch housing market into a buyer's market – particularly for first-time homebuyers – and increased local and foreign investment is pushing property prices back up again.
In contrast, rental prices remained relatively stable over the same period, and are showing significant growth as the economy recovers; in 2015, for example, housing experts said rental prices doubled in the main cities of Amsterdam, The Hague, Utrecht, Rotterdam and Groningen. Rental housing platform Pararius recorded the average rental price in the Netherlands in 2016 at around EUR 1,365 a month but in Amsterdam the average was EUR 2,200 per month, while in Rotterdam the average was around EUR 1,200 and in The Hague EUR 1,500. One main cause is the short rental supply in the private sector, which accounts for only some 5 percent of total housing stock, with the remaining rental stock classified under the social housing sector, which has long waiting lists and restricted to those on high salaries. Read more about renting in the Netherlands.
In comparision, as a result of low interest rates, in some cases it is possible to secure a mortgage lower than the average rental prices. However, costs associated with buying property in the Netherlands total around 6 percent of the purchase price, thus buying Dutch property is more suitable for long-term investments, at least a minimum of five years.
Who can get a Dutch mortgage?
There are no formal restrictions for non-Dutch citizens buying Dutch property or applying for a Dutch mortgage. However, if you are relatively new to a job or area, self-employed, on a low income or of a non-EU nationality, these may be red flags to banks in the Netherlands, much like anywhere else, particularly following the global financial crisis.
Each bank has different requirements but as a rule, if you’re from the EU, they will probably expect you to have a valid passport, have lived in the Netherlands for at least six months, have a citizen service number (BSN) and have permanent employment in the Netherlands. You may need to pay a deposit and be limited to a maximum mortgage of 90 percent of the property value, although the Netherlands does allow mortgages of the full value of a property. If you’re from outside of the EU you may additionally need to prove that your residence permit can be extended.
Regardless of nationality, if you're employed you will need to show proof of income (eg. a permanent employment contract) and a statement from your employer (werkgeversverklaring) with details of your contract and salary. Temporary workers and university researchers/PhD students will need statements from their employers/universities confirming their position. Self-employed people need to supply the last three years’ income tax returns and bank accounts.
How much can you borrow?
As a rough guideline you can borrow up to five times your gross salary, although dual-income households can typically borrow more. There is no mandatory minimum deposit, and in 2016 a mortgage can cover up to 102 percent of the purchase price of the property (to be reduced by 1 percent per annum until it reaches 100 percent in 2018), although more than 80–90 percent is rare. New laws introduced in 2016 mean that owners of energy-neutral homes will qualify for higher mortgages.
If you can't repay your mortgage loan, your home will be at risk of seizure. Therefore, it is advised to assess the monthly repayments required by your preferred plan, and determine whether you can afford them.
Online mortgage calculators
Cost of buying Dutch property and securing a Dutch mortgage
Buying a Dutch property and arranging a Dutch mortgage comes at a price, typically EUR 2,000–3,000.
These costs will cover:
- Valuation fee, typically EUR 300–400;
- Mortgage broker or advisor's fee, typically EUR 500–1,500;
- Administrative charges for the mortgage, typically EUR 500–1,000;
- Administrative charges for associated products, such as insurance. Typically, life insurance is the expected minimum with an administrative fee of under EUR 200 per person;
- Notaries charge as well, although as mortgage completion usually coincides with the sale completion there is typically only one charge.
- Costs related to the National Mortgage Guarantee, if applicable (see below).
Claiming a tax refund for your Dutch mortgage
In the Netherlands, it is possible to claim a tax refund on mortgage interest payments – even as an expat – provided the mortgage is a capital repayment mortgage (not an interest-only mortgage) and the property is your main residence. Thus, you typically need to be Dutch resident and paying taxes in the Netherlands to claim a tax exemption.
In 2016, the maximum refund was set at 50.5 percent of the interest, and will be reduced at a rate of 0.5 percent per year until 2040. This refund deduction only affects those with a gross annual income more than EUR 66,421; typically lower income earners can claim a refund of up to 42 percent of the interest.
If you are aged between 18 and 40 you can receive a tax-free, one-off contribution of EUR 53,016 from your parents to buy a home, which will be increased to a maximum of EUR 100,000 in 2017. Parents who used the one-off exemption in 2015 or 2016 will be able to increase their tax-exemption donation to EUR 100,000 in 2017 as well. In addition, in 2017 a parent-child relationship will no longer be necessary to quality for the exemption.
The following are usually tax deductible:
- Valuation fee
- Mortgage broker's fee
- Administrative charges for arranging the mortgage
- Notary's fee
- NHG fee
- A percentage of the mortgage interest.
Read more about tax advantages for expat homebuyers in the Netherlands.
How to apply for a Dutch mortgage
In the Netherlands, a mortgage is formally arranged after you have made an offer on a property and it has been accepted. However, it's important to make sure you have already investigated mortgage options and chosen your mortgage provider. They can give you a quote which, once you sign to agree the terms and conditions, will be valid for three months. It is usually possible to get an extension if the property transfer is going slowly.
Mortgages may be arranged directly with lenders (typically the larger banks) or via a mortgage broker (hypotheek makelaar) or a mortgage advisor (hypotheekadviseur). There are a large number of mortgage brokers and advisors, and some firms, including Finsens and Expat Mortgages, explicitly cater to expats. Additionally, according to the Financial Times, mortgage loans are increasingly originating from private funds acting on behalf of institutional investors (regiepartijen). Before the crisis, the main Dutch banks controlled around three-quarters of the Dutch mortgage market, but this landscape is increasingly changing as pension funds, insurance companies, small banks and foreign mortgage providers enter the market.
Large banks include:
- ABN AMRO – offers English-language mortgage sections on their website and advice tailored to expats on request.
- ING Bank (Dutch only).
- Rabobank (mortgages section in Dutch only).
- SNS (Dutch only).
In order to arrange a mortgage, an appraisal of the property must be made by a certified appraiser. This must be an objective third party – not the buyer's agent nor the seller's agent nor another interested party. It is advisable to have this done before you agree on a sale price as this could be a key piece of information. Structural surveys are typically not required to get a mortgage – your lender can provide you with the full list of what an appraisal must cover.
The mortgage deed must also be signed in front of a notary (notaris) and this is usually done at the same time as completion of the property transfer, by the same notary.
What types of loan are available?
There are two main types of mortgage available in the Netherlands: a linear mortgage or an annuity mortgage. The critical point is that any mortgage must include a plan for paying off at least 50 percent of the loan during the loan period.
Linear mortgage (lineaire hypotheek)
The borrower repays a fixed sum each month, which covers the interest and a slice of the capital. Repayments are fixed over the entire period.
Annuity or repayment mortgages (annuïteiten hypotheek)
The borrower repays a fixed amount of the capital each month, plus a fluctuating amount of interest. Repayments will go down over the loan period.
There is a wide range of options available in both cases, covering most mortgage types found elsewhere, such as a fixed or variable interest rate and savings-offset accounts. Unusually, it may be possible to fix interest rates for long periods, up to 10 years. Dutch mortgages are typically arranged for a period of 20 or 30 years.
Why can't I have an interest-only mortgage?
In the years since the 2008 financial crisis, the Dutch government has instituted a range of measures that have affected the housing market and property purchases. This includes banning interest-only mortgages where the loan amount is greater than 50 percent of the value of the property. It may be possible to get a combination mortgage, where part of the mortgage is interest-only and part a repayment mortgage.
Interest-only mortgages used to be common and it is not unusual for people, particularly those over 65, to still have the full value of their original loan outstanding. If house prices are in flux, this has put a lot of home owners in an uncomfortable position.
What is the National Mortgage Guarantee (Nationale Hypotheek Garantie)?
The NHG is a scheme that guarantees repayment of a mortgage, even if the borrower becomes unable to do so directly. It is only available for mortgages up to a certain value – this will decrease from EUR 245,000 to EUR 225,000 in July 2016. Taking into consideration the cost of various fees listed above, this means that as from July 2016, the maximum purchase price (if you want to be covered by NHG) will be EUR 212,264.
Should you become unable to repay the mortgage, the NHG ensures that:
- you will not be liable for any sum over the value of your property when it is sold;
- the lender will be repaid in full.
This means that if, for example, you become unemployed and can no longer repay your mortgage, your property will still be seized and sold. However, if the value of your property is lower than the value of your mortgage (eg. your home sells for EUR 150,000 but your mortgage is EUR 200,000), you will not be liable for the difference.
The NHG reduces the cost of lending, and lenders in turn offer NHG participants a lower interest rate, typically up to 0.7 percent lower.
The application fee for the NHG is 0.85 percent of the mortgage value. This means that if you buy a property that costs EUR 140,000 and put EUR 40,000 down upfront, the mortgage value will be EUR 100,000 and the application fee will be EUR 850.
Note: This information is provided as a guide only. If you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.
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