Getting a mortgage in the Netherlands is exciting, but the process can also be a headache. We guide you through what you need to know.
Buying a home in the Netherlands is a big financial leap of faith, and most people rely on financing to do so. As an expat, getting a mortgage can be confusing. But once you understand the steps and requirements for the different Dutch mortgages, you’re well on your way to become a homeowner.
This guide will help you understand the types of property purchase financing available for residents and non-residents alike, as well as the current mortgage rates in the Netherlands:
- Mortgages in the Netherlands
- Should you buy property in the Netherlands?
- Who can get a mortgage in the Netherlands?
- Types of mortgage in the Netherlands
- Mortgage rates in the Netherlands
- How much can you borrow for a Dutch mortgage?
- Mortgage providers in the Netherlands
- How to apply for a mortgage in the Netherlands
- The National Mortgage Guarantee
- Mortgage costs in the Netherlands
- Property taxes in the Netherlands
- Mortgage repayments
- Refinancing a mortgage in the Netherlands
- Useful resources
Looking to buy your new dream home in the Netherlands? Expat Mortgages can help. Their team of mortgage experts can help you with every step of the way, helping you get the keys to your new place in the Netherlands. For more help and guidance, contact the experts at Expat Mortgages today.
Mortgages in the Netherlands
Mortgages are a hot topic in the Netherlands at the moment. As with most of central Europe, Dutch interest rates are currently very low. This means it is a good time to take out a mortgage, as you have to pay very little on what you borrow. What is more, providers are lending up to 100% of a property’s value.
Should you buy property in the Netherlands?
House prices in the Netherlands have skyrocketed in recent years, and are continuing to rise in 2020. Although, according to bank ABN AMRO, there are some signs of this surge slowing slightly. The market is overheated, and there is need for at least 80,000 new houses to be built to ease the housing shortage. This means that it is a seller’s market.
However, it is not all bad news for buyers. While prices are high, mortgage rates are at an all-time low. And with European banks set to lower interest rates to meet competition, mortgage rates could fall even further. As lenders continually cut mortgage rates for short, medium- and long-term loans, homebuyers can lock in record-low rates for two, five, or up to 10 years or more, increasing their financial security.
This means that despite high prices, especially in the major cities of Utrecht, Amsterdam, The Hague, and Rotterdam, mortgage repayments are often lower than rent prices. With rent prices rising each year, it often makes better financial sense to buy property rather than rent in the Netherlands, especially as the value of your property is likely to continue to grow.
Who can get a mortgage in the Netherlands?
Technically, anyone with a residence permit, temporary or permanent, has the same formal rights when it comes to applying for a mortgage. That said, if you are new to a job, without a permanent contract, self-employed, on a low income, or of a non-EU nationality, it may be harder to get a loan or financing on 100% of the purchase price.
The requirements change depending on the bank, but generally you need:
- A valid passport
- A BSN (citizen service number)
- Proof of permanent employment in the Netherlands or proof of income
- For employees, but also temporary workers or PhD students: a statement from your employer (werkgeversverklaring)
- To have lived in the Netherlands for six months (only required by some providers)
- Three years of tax returns and accounting for self-employed residents.
It’s worth noting that if you have been self-employed for less than three years it can be very hard to get a mortgage approved.
Getting a mortgage as a foreigner in the Netherlands
Both EU and non-EU citizens are entitled to take out a mortgage in the Netherlands, but the requirements may be stricter for non-EU citizens.
Banks may also not accept to provide non-permanent residents with a mortgage covering 100% of the purchase price if that price is above the National Mortgage Guarantee, which is €310,000 in 2020.
Unfortunately, the Mortgage Credit Directive, brought in by the EU in 2015 also made it difficult for banks to offer mortgages to expats with income in a non-EU currency. This is due to banks having to absorb the risk of currency fluctuations. However, banks like ABN AMRO found a solution to this problem: they now take into account only 90% of the non-euro income to assess your maximum mortgage amount. This has meant expats earning in another currency have more options.
Note that getting a mortgage for a second home to rent is very difficult. See our guide to buy-to-let mortgages in the Netherlands for more information.
Types of mortgage in the Netherlands
While there are many different types of mortgages available in the Netherlands, the most common are:
1. Linear Mortgage (lineaire hypotheek)
You repay a fixed amount of your loan each month, which covers the interest and a slice of the capital. Repayments occur at fixed times during the mortgage period. As you pay back the loan, the amount you pay in interest decreases.
2. Annuities mortgage (annuïteiten hypotheek)
The borrower repays a fixed amount each month. In the beginning, you repay a small amount of the loan and a higher amount of interest (meaning you can deduct more from your income tax) and gradually you will pay more of the loan and less of the interest.
Only these two kinds of mortgages are eligible for income tax deductions.
Some other mortgage types include:
- Interest-only mortgage (aflossingsvrijehypotheek): where you pay back only the interest, not the loan. Banks only permit this under special circumstances.
- Credit mortgage (krediethypotheek): Similar to a normal bank account, you can withdraw and deposit money and pay interest on the amount you borrow.
- Savings mortgage (spaarhypotheek): links your savings account to your mortgage; instead of repayments you deposit money and pay back the mortgage in whole at the end of the term.
Mortgage rates in the Netherlands
Although mortgage rates in the Netherlands are currently very low, rates vary depending on interest rates. Your mortgage rate will also differ depending on the time over which you plan to pay back the loan, up to a maximum of 30 years. The interest rate for your mortgage is based on the term of the fixed period and on the risk category of the loan. This risk category is based on the loan-to-value (LTV) ratio: the amount of the loan compared with the value of the property. The lower your LTV, the lower your interest rate.
There are two types of interest rates in the Netherlands: fixed or floating. While floating rates are often lower, there is always the risk that they can increase. This is especially true due to the fact that current interest rates can’t sink much further.
As of February 2019, Dutch mortgages rates from the major banks are as follows (based on a maximum loan-to-value of 100%).
- Five-year fixed mortgage: 1.7–2.2%
- 10-year fixed mortgage: 2.2–2.57%
- 20-year fixed mortgage: 2.65–3.4%
If your house price increases you may be eligible for a lower interest rate. You can apply for a valuation or challenge how much the municipality deems your property is worth through WOZ – valuation of immovable property.
How much can you borrow for a Dutch mortgage?
As a rough guideline, you can borrow up to five times your gross salary, although dual-income households can typically borrow more. If you buy a home with renewable energy systems, you can borrow up to €9,000 extra when taking out a mortgage.
As of 2018, the Dutch government placed restrictions on the loan-to-value amount it is possible to borrow. Whereas before you could borrow 101% of the value, the maximum mortgage is now 100% of the property price. This means that any additional costs, like fees associated with the purchase or renovations, have to be financed with your own savings.
Good news, though: keep in mind that you will be able to borrow more if you enjoy the 30% tax ruling on your income.
Online mortgage calculator
Bear in mind that these calculations can only act as a guide. You should talk to your provider or a mortgage advisor before you take out a mortgage.
Mortgage providers in the Netherlands
Mortgages in the Netherlands may be arranged directly with lenders (typically the larger banks) or via a mortgage advisor (hypotheekadviseur).
Banks offering mortgages to expats in the Netherlands
- 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)
Increasingly, pension funds, insurance companies, small banks, and foreign mortgage providers are also providing competitive mortgage rates.
Mortgage advisors offering mortgages to expats
Mortgage advisors or brokers act as an intermediary between you and the mortgage provider, to advise you on the best fit for your finances. This is especially useful if you don’t speak Dutch or are new to the Dutch property market. Expat friendly brokers in the Netherlands include:
How to apply for a mortgage in the Netherlands
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.
In order to arrange a mortgage, the property must be assessed by a certified appraiser. This must be an objective third party – not the buyer’s agent, the seller’s agent, nor another interested party.
It is advisable to do this before you agree on a sale price, as this could be a key piece of information (even though this has become a feat in the current sellers’ market). 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.
Once you have accepted a mortgage offer and filed the appropriate documents, you will sign the agreement and make an appointment with the notary (notaris) to sign the mortgage deed. This usually happens at the same time as the signing of the transfer deed.
The National Mortgage Guarantee (NHG)
The NHG (Nationale Hypotheek Garantie) is a scheme that guarantees repayment of a mortgage, even if the borrower becomes unable to do so directly. It is only available for Dutch mortgages up to a certain value – €310,000 in 2020, and up to €328,600 if the home meets certain energy-saving standards. Should you become unable to repay the mortgage, the NHG ensures that:
- you are not liable for any sum over the value of your property when it is sold;
- the lender is 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 (e.g., your home sells for €150,000 but your mortgage is €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% lower.
The application fee for the NHG is 1% of the mortgage value. This means that if you buy a property that costs €140,000 and put €40,000 down upfront, the mortgage value is €100,000 and the application fee is €1,000. The interest rates on NHG-backed mortgages are usually the lowest available.
Mortgage costs in the Netherlands
As well as the price of the property and the mortgage repayments, there are other costs involved in taking out a mortgage. These are usually calculated in relation to the value of the property, plus VAT (BTW in Dutch). However, some mortgage advice services charge a set fee (from €3,000 upwards) which included the fee to the mortgage provider. Costs can include:
- Mortgage arrangement – Hypotheekadvies: 1% of mortgage or 1.2 % (plus BTW) of purchase price
- Mortgage contract – Hypotheekakte: 0.15% (plus BTW) of the purchase price, tax deductible
- Notary charges (Notaris)– around €1,500
- National Mortgage Guarantee (NHG) – 1% of the mortgage value (see above)
- Valuation fee – Taxatierapport: 0.2% (plus BTW) of the purchase price
- Transfer tax (overdrachtsbelasting): 2% of the purchase price – see below
- Insurance costs
Property taxes in the Netherlands
When buying a property in the Netherlands you must also pay a transfer tax (overdrachtsbelasting) which is 2% of the purchase price (6% for commercial buildings.)
Property tax in the Netherlands (onroerendezaakbelasting), is calculated on the deemed rental value of the property. The term for this is WOZ-waarde, or immovable property tax. Each municipality determines its own property tax rate; in general, this ranges between 0.1% and 0.3% of the property value.
If you rent out a property in the Netherlands that you own, the value of the property – the WOZ-value – is taxed, minus the mortgage amount. This is taxed annually as part of your income from savings and investments.
Tip: A higher WOZ value generally means higher taxes. However, those with a mortgage backed by the NHG can effectively lower their interest rates by entering a lower risk category on the mortgage.
As long as you are paying taxes in the Netherlands, it is possible to claim a tax refund on mortgage interest payments. This is possible, provided the mortgage is a capital repayment mortgage (not an interest-only mortgage) and the property is your main residence.
Some of the costs listed above are also tax-deductible including:
- Valuation fee
- Mortgage broker’s fee
- Administrative charges for arranging the mortgage
- Notary’s fee
- NHG fee
- The mortgage interest
However, if you choose to rent out your property, you are no longer eligible for tax deductions on the mortgage payments. And of course, all tax deductions fall away if you are no longer resident in the Netherlands.
Additionally, it is worth looking into the 30% ruling, a tax exemption for expats hired abroad to work in the Netherlands. This ruling may have a positive impact on your ability to get a mortgage, or the amount you might be eligible for. At least it has a very positive effect on the amount of income tax you pay – so it’s a good idea to consult with a mortgage adviser to see what advantages your 30% ruling status can grant your mortgage application.
Property insurance in the Netherlands
It is likely that you will need to have proof of homeowners insurance (woonhuisverzekering) when getting a mortgage in the Netherlands. In fact, some providers often offer a discount if you take out both your mortgage and home insurance with them. A standard policy covers fire, storm, flood, and theft, although the criteria can vary.
If you buy an apartment, the Association of Owners (VVE) generally arranges a home insurance plan. Apartment owners generally share the costs equally amongst each other. Other types of insurance can affect your mortgage agreement in the Netherlands, from contents insurance to life insurance. Providers of home cover and contents insurance in the Netherlands include:
Contents insurance (inboedelverzekering) is also recommended. This usually covers furniture, glass breakage, and general contents. A high-value contents policy (kostbaarhedenverzekering) will be needed to cover rare or expensive possessions. Many insurance companies will offer a discount if you can present a BORG certificate – to show your property has adequate protection against burglary and certified security equipment installed. Providers of home and contents cover in the Netherlands include:
Aside from the set monthly credit and interest payments, it is also possible to make additional payments to reduce your interest rate. Most banks allow annual repayment of 10% of the original mortgage without a fine.
Doing so depends, however, on the type of mortgage you have. With an interest-only (aflossingvrij) mortgage, for example, you pay no repayments on the actual loan, and only pay monthly interest. Making lump-sum or extra payments on this type of mortgage may carry penalties. However, if your mortgage allows for extra payments, the benefits of a longer-term lower interest rate can lead to real savings over time.
Refinancing a mortgage in the Netherlands
If you already own property in the Netherlands, refinancing your mortgage can be a great way to reduce your mortgage costs, especially in the current period of low interest rates. Mortgage refinancing is basically the process of re-mortgaging your property. This new mortgage repays your existing mortgage in full and you start making monthly payments on your new mortgage.
Independent mortgage advisers have access to all lenders in the Netherlands and are able to compare rates and conditions for you in order to get the best deal. But there are also downsides including costs that outweigh savings. Below are some of the pros and cons of refinancing:
Pros of refinancing a Dutch mortgage
- Lower monthly payments: Shopping around for a lower interest rate will reduce your monthly payments. A further discount on the interest rate may apply thanks to a lower loan-to-value due to increased property prices. These savings might be affected if you sell within a few years of refinancing.
- Reducing the term of your mortgage: If you opt to keep your monthly repayments the same, you could pay off your mortgage faster. For example, a 30 year mortgage could be paid off in 20 years.
- Transferring to a more secure mortgage: if you have a mortgage with a variable interest rate, where your interest rate fluctuates according to, for example, the Euribor rate, you could take advantage of low interest rates by transferring to a fixed-rate mortgage and avoid the risk of payments rising in the future.
- Accessing equity on your home: This has less to do with savings, but refinancing can help if you want to take out some equity from your property to cover a major expense such as home improvements – or a lower monthly income.
Cons of Dutch mortgage refinancing
- Costs: The costs involved with setting up a new mortgage may offset any savings you might make from the lower interest rate. They may include intermediary fees, compensation to your existing lender for loss of interest, and Notary fees if you switch lenders.
- It can increase debt: If you refinance your mortgage to tap into home equity, it can be a slippery slope to ever-increasing debt, so you should make sure that you can cope with the extra financial responsibility.