For expats in the Netherlands or Dutch citizens abroad, buying and financing a home in the Netherlands can be a challenging operation.
About 20 years ago, banks rarely catered to international clients wishing to buy a home in the Netherlands. If you were not Dutch, banks would worry about the duration of your residence permit and would insist on indefinite residence status — which you never get upon arrival in the country. But in the years that followed, banks became aware that these international clients paid their mortgages on time, and the percentage of foreclosures were in fact even lower than those of the native buyers. Even the non-resident Dutch treated their houses back home with care, honouring their financial obligations with a minimum of mortgage defaults.
The banks therefore started to become more open to this large group of prospective clients and even developed special guidelines to serve this international clientele. Some banks were more adept than others, but so far so good. De Boer Financial Consultants explains how expats in the Netherlands have struggled with obtaining a fair Dutch mortgage.
The Mortgage Credit Directive
Just when we started to think that banks (or at least some banks) were treating everybody equally, the European Union brought forth new regulations. In Brussels, it was decided that everybody with an income in a currency other than the euro should be protected against currency fluctuations and the risk of buying a house in the Eurozone. Banks were instructed to offer foreign currency mortgages in some cases — should the client have an income in a foreign currency, he could ask for a mortgage in this same currency. This is one of the stipulations in the so-called Mortgage Credit Directive, which was introduced in 2015.
Unfortunately, banks had and still have no intention to offer these foreign currency loans. Firstly, their systems can simply not handle it. Secondly, it would force them to deal with currency risks themselves, a totally unacceptable situation for banks.
Their answer was simple: approximately one year ago, one bank after another closed their mortgage desks for anyone with a non-euro income. The group most affected by this new measurement was, of course, the expat community. Many internationals earn their income in a foreign currency — and thus we are back to square one.
German banks to the rescue
Luckily, a German bank just across the border had their own interpretation of the Mortgage Credit Directive and were able to serve many clients with non-euro (and non-EU) income. To this date, they finance clients with euro income; if it is a foreign currency outside the EU, they are also able to provide mortgages.
Now we were able to serve most clients, except Sterling income, Swedish krona, or Danish krone. Their rationale is that these countries are part of the EU, so this German bank has to follow the European Mortgage Credit Directive regulations.
A new solution for expats buying homes
Towards the end of 2016, ABN AMRO sought external advice on how to deal with the Mortgage Credit Directive and found a solution on how to serve their non-Euro income clients — a huge relief for the expat community and their financial advisors. ABN AMRO now only considers 90 percent of one’s income when someone’s maximum mortgage amount is assessed. This way, the client has some protection against currency fluctuations and is less vulnerable to a lower salary when the exchange rate changes.
The challenging housing market in the Netherlands
Buying a house in the Netherlands as an expat is now possible again, right? Well, you may have noticed that house prices in the Netherlands are increasing — this is due to the increased demand and decreased supply. You can probably get a mortgage, even if your income is not in euro or your residence status is not indefinite, — in many cases, you can get a mortgage even if you have a temporary contract of employment.
Prospective house buyers that are looking on Funda, however, will find that most houses or apartments in the Netherlands are already sold or under offer. There are simply not enough houses to accommodate everybody and every budget. This is partly caused by the fact that the Netherlands has limited space to build; it may also be due to the fact that during the financial crisis, there was no money to build, and people were hesitant to invest money in new developments.
If you are interested in buying a house or apartment in the Netherlands and you wish to improve your chances, it could be worth your while to do your financial homework up front. Doing so will allow you to move very quickly when the right house for the right price comes along.