Entering the property market is a big step — particularly for expats. Mindy Ran presents a brief guide to mortgages, the costs involved and the steps you will need to take.

Entering the property market is a pretty big step — particularly for expats, who likely don’t speak the local language or have enough knowledge about the market or applicable laws. Here is a brief guide to the property market, mortgages and the costs involved.

There has been a housing shortage in the Netherlands since the sixties. Currently, in the urban areas demand far exceeds supply. Even with the government pushing to create more real estate for sale, the market is not turning over fast enough, ‘in-demand’ properties in older urban areas are at the high-end of the market, and prices are steadily rising.

Renting property is usually quite expensive at popular locations and, since mortgage interest is deductible it may be more cost-effective to buy a house. Nevertheless, it should be considered that there are extra costs (kosten koper) of around 10 percent of the purchase price, existing of u.a. 6 percent transfer tax, notary costs, mortgage costs and real estate agent. These costs are on top of the cost of the property, but many are tax-deductible. The term KK at the end of a price means ‘Kosten Koper’ — the buyer pays these costs. Therefore, it is probably not sensible to purchase a house if you are here on temporary assignment of three years or less.

It is recommended that you first do some basic research into whether you are eligible for a mortgage and the sorts of mortgages available. The general basic requirements for a mortgage of up to five times your gross salary are: resident in the Netherlands in permanent, full-time employment or self-employed and able to produce accounts (by a recognised accountant) for the past three years as well as a prognosis for the current year.

Several people may be bidding on the same house, at the same time, if your mortgage details have not been sorted out, you can lose the house in the time it takes you to sort it.

These are general guidelines only as individual circumstances can vary and some mortgages can be arranged outside these guidelines (see 30 percent ruling, below).

There is a large range of mortgages available, which used to be low cost, but prices and interest rates are also slowly rising, including: Aflossingvrij (interest only), Annuiteit (all interest payable over the mortgage added to capital and divided into monthly payments, monthly costs remain the same but amount of interest reduces within the amount), Leven or Spaar (Endowment Mortgage), and Effecten (Share investment Plan).  Shop around to find the best deal.

Important: You should also be aware of potential hidden costs such as: bringing older or listed properties up to current building standards and fluctuations in ground rent on leasehold properties (see below).

The ‘value’ of a house for taxation purposes is determined by the local municipality, this is known as the WOZ-waarde, and the tax (eigen woning forfait) is currently at 0.6 percent of this value.
 
Steps in the purchase of a House

• Discussing your wishes and assistance in finding and purchasing the property with an NVM real estate agent.
• Organising and planning several viewings, requesting relevant information.
• Negotiation of the price, discussing the conditions and making the bid.
• Sign the purchase contract which covers all aspects of the sale and protects both parties during the process - New regulations give both parties rights to cancel this agreement within 72 hours.
• Have the house valued (taxatie) for the mortgage by an independent 'taxateur'.  
• Arrange 10 percent as deposit to be paid through bank within three weeks.
  Get the mortgage.
• At the date of delivery, inspect property; sign the delivery and mortgage deed at the notary (notaris). key handover.

If more than one person is bidding on the house, it is entirely up to the owners as to which buyer they choose. This is not always related to the top price.

Tips and pitfalls

• If you are not using a recognised (NVM, Netherlands Association of Estate Agents) agency, beware; apartments for sale in urban areas may fall under the control of the local housing authority (Dienst Wonen), each with very specific regulations. If it does, you will require a woonvergunning or huisvestingsvergunning (living or housing permit) to actually live in it, even if you own it. Many expats have been caught out buying a flat only to discover that they did not have permission to live in it.
• In the Netherlands, verbal agreements are no longer binding, you need to have a written agreement; but be cautious as to what you agree to verbally.
• Many apartments in city centres are leasehold (erfpacht) and the terms of the ground rent can affect mortgages. Ground rent contracts run for a specific period of time. Check whether the contract is close to expiration, as this is when rates are adjusted. Last year, when contracts expired in The Hague, costs skyrocketed from EUR 50 to EUR 600 per year.

Updated by Finsens April 2008

[Copyright Expatica 2008]