Should I buy or rent?

This is a question all expats planning to stay in the Netherlands for at least a few years ask themselves. Many go with the second option because buying in a foreign country seems both complicated and scary.

There is no denying that buying property anywhere is a major undertaking; add the complication of doing it through the Dutch system and you have a recipe for many restless nights. It is always preferable to get professional advice – but make sure you know what's going on in the process.

That's where a publication by Henk van Seijen, partner at independent financial advisor Finsens, comes in. 'Dutch mortgages for expats in the Netherlands' is a handy A5-size booklet which provides a clear guide in English on how to purchase and finance a home in the Netherlands.

Mortgages are tax-deductible

Most of us have heard about the generous mortgage tax relief. But haven't politicians been planning to axe it for years?

Van Seijen explains that with the new government no changes are expected for the coming four years. The Labour party (PVDA) plans, which proposed a maximum benefit of 42 percent on mortgage interest, didn't go through and a lot of expats can still benefit from a 52 percent tax relief on their mortgage interest.

"Given the political climate in the Netherlands, there will very likely be a transitional period or compensation measures if the tax deduction is abolished in the future," says Van Seijen.

Van Seijen's guides you through the house purchasing process step-by-step.

Talking to banks

First talk with a financial advisor to establish your price class, based on the maximum mortgage they are prepared to grant you, as well as the amount you plan to spend each month on the interest and/or repayment. Not forgetting to calculate the "financing and service charges, municipal taxes, and a sum set aside for maintenance and additional insurance".

It is relatively easy for EU citizens to get a mortgage similar to those offered to Dutch citizens. However, how willing the different banks are will depend on the current state of the market.

In general, banks are more open to non-EU citizens than they were two or three years ago. Plus, if an expat is entitled to the 30 percent ruling and has a permanent contract, then it can also be easier to get a mortgage in the first five years of their stay the Netherlands.

Finding a property

Find out about the properties on the market by exploring the internet or commissioning an estate agent (makelaar). Van Seijen explains, in four steps, what you can expect from your estate agent.

He advises expats to focus not only on getting the right price, but also to be aware of issues such as land-lease and construction of the property; which is particularly relevant when buying property in Amsterdam. "Employ the services of an estate agent who would understand the nuances of such issues," he cautions.

Mortgages – make sure they are transparent and flexible

The bulk of the handbook deals with financing the purchase. It itemises the charges, explains what they are for, and gives an example of how they can add EUR 40,000 to a EUR 400,000 home.

It also deals extensively with the types of mortgages available in the Netherlands, interest, and their associated terms and conditions. The two types of mortgage are:

- Mortgages with capital repayment over the duration of the loan
- Mortgages with capital repayment at the end of the loan period

"We advise expats to go for transparent solutions, to take out mortgages linked to an investment account or mortgages with repayment schemes – annuity mortgages. Both types can be combined with an interest-only mortgage," says Van Seijen.

"We are not in favour of an endowment mortgage, which is linked to a savings policy – with an insurance company, because of the high costs of a savings policy; higher than those for investment accounts," says Van Seijen.

As well as being transparent, a mortgage for expats should be flexible. "If an expat decides to leave the Netherlands in five years, they don't want to be tied up in savings plan with high surrender costs," he says.

If and when you decide to leave the Netherlands, you also need to know about the options - selling, letting or keeping the property.

Subletting

Expats are more likely to sublet than other groups, and in general banks are not keen – mortgage contracts carry a clause for renting out property. 

"However, you can ask permission. If the bank feels that you won't return they won't be willing to cooperate unless the value is much higher than the outstanding mortgage – for instance, through paying off 30 percent of the mortgage," says Van Seijen.

Because of this, it is important for expats seeking a mortgage to look at the total picture; interest, cost of life insurance, savings plan, investment accounts, says Van Seijen. For example it might be beneficial to pay 0.2 more interest and lower premium for life insurance and savings plans.

"With interest renewals, always check if a proposal is competitive with other banks," says Van Seijen, "because this is the time you can change your mortgage without a penalty."

The booklet also deals with the 30 percent ruling and the fiscal effects of home ownership and has a glossary of terms translated from English to Dutch and vice versa, which is essential, unless you are fluent in business Dutch.

Everyone interested in mortgages can order a book at Finsens.