While getting a mortgage and buying a house in the Netherlands in 2021 might be the smart thing to do, it’s definitely not the easiest — especially when you have the 30% ruling to consider. Never fear, let’s run through all you need to know about to make this feat possible.
First things first, what is the 30% ruling? And what does it have to do with getting a mortgage?
Under the 30% ruling, highly skilled expats who have been hired from abroad may be entitled to keep 30% of their wage, including reimbursement for moving costs — tax-free! Recipients of the ruling used to benefit from this tax benefit for up to eight years but since 2019, this has been cut to five.
Many get the impression that those who receive the 30% ruling have an advantage over others when it comes to applying for mortgages — after all, 30% of their income isn’t taxed, meaning they’ll come away with a higher loan, right? Nope! Let’s run through the real effects of receiving the ruling when applying for a Dutch mortgage.
DutchReview teamed up with Melissa over at Expat Mortgage Platform to find out all there is to know about the 30% ruling and Dutch mortgages. If you have any further burning questions about applying for a mortgage as an expat in the Netherlands, they’re the experts to turn to!
How does the 30% ruling affect your mortgage application in the Netherlands?
When determining how much you are eligible to lend, mortgage advisors will take a look at your annual gross income — meaning everything that you earn before tax.
This means that even though recipients of the 30% ruling have a boost when it comes to their net income (what they keep after tax), mortgage advisors and banks are mostly concerned with their gross income — what you earn before any taxation (or tax breaks!) are applied.
Applicants without the 30% ruling won’t get to keep as much of their income after tax but their mortgage is still determined based on what they make before tax. Meaning that when it comes to your mortgage application, most banks and mortgage advisors do not take the 30% ruling into account when calculating how much you can borrow.
Instead, the bank mainly takes your income and any additional components such as vacation allowance, the ‘eindejaarsuitkering’, a bonus, and something like an irregularity allowance into account.
If a mortgage advisor does take the 30% ruling into account
While most mortgage advisors do not apply the 30% ruling when calculating your mortgage loan, some do. If they do this, the additional sum that you are loaned based on the ruling must be repaid within the period that you benefit from the ruling. However, even if you do receive slightly more, the extra amount that you can borrow with the 30% ruling, is rather limited.
Note: While there are some banks and mortgage advisors who do take the ruling into account, many in the sector see this as breaking the code of conduct. For this reason, most banks and advisors will not take the 30% ruling into account. For example, Melissa tells us that at Expat Mortgage Platform the 30% ruling is not calculated into your mortgage loan.
How will the latest adjustments to the 30% ruling affect your mortgage application?
In 2019, it was decided that those who receive the 30% ruling would only receive it for five years instead of eight. This applied to those who were already receiving the benefit and as well as later recipients of the ruling.
You’re probably wondering, can I still get a mortgage if the 30% ruling is adjusted? Fortunately, we can be very clear about this — yes you can!
Again, most banks and advisors do not take the ruling into account when you apply for a Dutch mortgage. This means that regardless of the changes to the length of time that you benefit from the ruling, it should not be a determining factor in your mortgage application.
Unless you were relying on the extra income from the ruling to pay your mortgage (not a smart idea to begin with) not much should change in terms of your mortgage application.
In the rare case where an advisor would take the 30% ruling into account, five years of extra income would also mean a lower mortgage compared to eight years that the original 30% scheme would account for.
Will losing the 30% ruling also affect your current mortgage?
It is also possible that you already have a mortgage in the Netherlands that you applied for with the 30% ruling still going strong. Will the bank evict you from your home once the 30% ruling ends? First off, we know there’s lots of stress about this, so right away:
No: the changes to the 30% will not affect your current mortgage in the Netherlands directly. Instead, banks mainly look at whether you can just make the monthly payment.
When taking out the mortgage, the affordability of the mortgage was mainly based on your gross income and what your income would look like once the 30% ruling was expired.
Unsure of whether you’re even eligible for a mortgage? Try out Expat Mortgage Platform’s mortgage calculator.
That being said, the end date of the 30% ruling (which was based on eight years of benefits in this case) may also have been taken into account — although if it was, yet again, it wouldn’t have made much of a difference to your mortgage.
Melissa from Expat Mortgage Platform explains to us that in the end, the shortening of the 30% ruling will have little or no effect on the existing mortgages in the Netherlands.
Instead, she says it’s simple: The most important thing is that the monthly payments are made.
Navigating the Dutch housing market can be tough as an international — especially when there are tax benefits involved! Luckily, when it comes to the 30% ruling you shouldn’t experience any rash changes to your mortgage.
Considering taking out a Dutch mortgage? Get guidance that’s tailored toward internationals from the experts at Expat Mortgage Platform with a free consultation.
How have you and your mortgage been affected by the changes to the 30% ruling? Tell us in the comments below!
Feature Image:Matheo JBT/Unsplash