Securing a mortgage in the Netherlands – is this the dream for you?
So you finally decided on buying a house in the Netherlands instead of renting! Great! Congrats to you, that’s a very grown-up move indeed. Now simply make a bid on that house, get it accepted and walk to the bank with a few hundred thousands of euro’s in cash to buy your house in the Netherlands.
What’s that? Don’t have that kind of money stashed in the attic? Then you need to get a mortgage in the Netherlands as an expat (and there are simpler things in life to be honest). So how does one secure a Dutch Mortgage?
This recent-home-buyer here at DutchReview teamed up with the good people of Mortgage Monster in order to get 7 questions about how to get a mortgage in the Netherlands answered.
#1 Who can get a mortgage in the Netherlands?
If you’re planning to buy a house in the Netherlands, then it might be good to know if that is actually possible at all. And often, more is possible than you think, whether you are employed or have your own business. Even if you have another nationality, that does not necessarily have to be an obstacle to get a Dutch mortgage. Whereas in the past, banks were hesitant to give out a mortgage to an international, we now see that more and more mortgage suppliers are adjusting their criteria for obtaining a Dutch mortgage to the situation of you internationals reading this.
Getting a mortgage in the Netherlands: criteria and factors
But there are of course several points of attention that have an effect on the possibility of obtaining a mortgage in the Netherlands and the amount of money that’s involved with it. Just think of the all-round background of the customer or the work situation (yes, permanent contracts are good, but getting a mortgage in the Netherlands is still possible when you’re on a temporary contract).
There’s 1 condition that applies to every bank and everyone applying for a Dutch mortgage: you must live in the Netherlands. If you buy a house and you need a mortgage, then this house must be located in the Netherlands and you must be registered (or register) at a Dutch address. If you also have a BSN number then things just got a whole lot easier.
Obviously, for a Dutch person this is all easy-peasy. If you come from the EU or EEC then you still need the registration and BSN, but otherwise there are no additional requirements. And don’t worry, if you’re not from the EU it’s still very much possible to get a mortgage in the Netherlands!
We asked Jan-Thomas at Mortgage Monster: “You do have to take into account that there is a smaller pond of money lenders for us mortgage intermediaries to fish in, if you’re an expat trying to get a mortgage in the Netherlands. This is because there are certain exceptions and rules at the banks when it comes to expats. Particular attention is paid to the length of stay in the Netherlands (how long have you been living in the Netherlands?) And, to a lesser extent, employment history – mostly focusing at you being in regular employment or an entrepreneur, for how long you’ve worked here and if you have a permanent contract or not.
If you have only lived and worked in the Netherlands for a few months, it is already possible to apply for a mortgage and we can already compare a few lenders. If you have lived and worked in the Netherlands for a number of years, then the pond with money providers is already a lot bigger!”
#2 What are the (upfront) costs with a Dutch mortgage?
So you might be wondering if you don’t need tons of money already in order to get a mortgage in Holland (yes, we’re talking about you Germany, with your 70% financing mortgages!)
In the Netherlands, you can get financing of up to 100% of the (market) value of your house. So if the value is €300,000, you can get a mortgage for as much as €300,000. Sounds pretty simple right?
However, keep in mind that you will have to bring some of your own money to the table as there are several costs involved in buying a property that can’t be financed by a Dutch mortgage (although a mortgage intermediary can sometimes help with this). These are some of the costs you should expect to pay out of pocket:
- A transfer tax that costs 2% of the sale price of the home
- The fee for the appraisal/valuation report, which is required if you’re getting a mortgage (will cost you a couple of hundred euro)
- Arrangement fee for the mortgage
- The fee for the notary which is somewhere in between 1.500 and 2.000 euro. Especially in the Amsterdam region – but this will include VAT and a translator to be there to make sure you understand the deeds you need to sign to get that Dutch mortgage
- Structural survey (optional, a few hundred)
- Real estate agent (optional, but advisable and somewhere in between 1 or 2 thousand euro)
As a rule of thumb, the costs of buying a house in the Netherlands will be roughly 4% to 6% of the buying price. You can read more about these costs here.
Actually, most of the costs involved were paid at the notary office, so, all in all, it was at least a clean and very ‘overseeable’ deal. Another plus for the Netherlands is that the costs of obtaining a mortgage are also tax deductible. Think of the advisory- and mediation costs, the valuation report, mortgage deed at the notary and the costs for the NHG. In my personal situation, we paid like 6K and had 3K returned to us after a few months through a ‘voorlopige teruggaaf’ – first time I’ve ever been happy with the tax man!
(Almost no money left for furnishing your house? Here’s a guide to cheap stuff for your house in the Netherlands)
#3 How are the Dutch mortgages rates?
The Dutch mortgage rates (and mortgage rate tax deducation) are one of the primary reasons why everybody has been nagging you that it’s smart to buy a house in the Netherlands right now.
For years now the mortgage rate has been at an all-time low number. Years ago the rate started its descend, caused by all kinds of monetary reasons such as the ECB keeping the international rates down throughout Europe. Because rates are low all across the board, your savings aren’t making any money – making it even more interesting to buy a house in the Netherlands.
Fixed rate mortgage periods in the Netherlands
Everybody kind of thinks that the rate won’t go any longer so now it’s a popular option to set your mortgage rate on a fixed level for a long period of time (so it won’t get bumped up to like 7% in 2023 for example).
When you’re calculating the costs of a mortgage in the Netherlands:
In case you’ve lost the plot, I’ve asked Jan-Thomas of Mortgage Monster for an example:
Imagine you have found a house and you need a mortgage to buy this. Your bid of 300,000 euros has been accepted and the property is also worth 300,000 euros. You want to take out a mortgage for the maximum amount.
At Bank X they have a nice interest rate for 20 years: 3%. What does that mean for the monthly payment and what do you get back from the tax authorities? (This regulation is called the mortgage interest tax deduction aka hypotheekrenteaftrek – we know the word is hard).
For an annuity mortgage (more on that at #4) you then pay, for example, gross 1265 euros per month. Interest and payments are included in this amount, with the interest amount starting at € 750 and slowly decreasing. The amount you get back from the tax office is around 315 euros but because it runs parallel to the interest you pay, this also slowly decreases.
We know it’s hard, that’s why you might want to reach out to a mortgage intermediary, they can also tell you more about the different kinds of mortgages in the Netherlands – which happens to be #4
#4 What type of Dutch mortgages are there?
There are quite a few types of mortgages in the Netherlands, but the most common ones are the annuities mortgage (annuïteitenhypotheek) and the linear mortgage (linear hypotheek). Also only these two kinds of mortgages are eligible for the interest tax deduction which is the thing you’re aiming for.
Linear mortgage in the Netherlands
With a linear mortgage (lineaire hypotheek) the amount of debt that you repay is the same every month. On top of the debt you will also pay interest, which will be the highest in the beginning of the mortgage since you haven’t paid back anything yet. At the beginning of a linear mortgage the costs are high, but they will gradually decrease- and therefore paying off your mortgage in the Netherlands goes the fastest if you opt for this kind of mortgage. The disadvantage of the linear mortgage is that you pay a higher amount in the beginning of the mortgage, most of the time this is also during a period in your life that you can’t handle this. The benefit of a linear mortgage is that the total amount paid overall is much lower because you pay less interest as you start to pay off immediately.
With an annuities mortgage (annuiteiten hypotheek) you will pay the same amount over the whole period of the mortgage. In the beginning, this amount is mainly interest and only a small part of the loan. Gradually this changes so that at the end of the mortgage you will mainly repay your loan.
With an annuities mortgage you usually have lower monthly payments in the early years of the mortgage period than a linear mortgage. The high amount of interest can be deducted from taxes, which makes your net monthly cost low at the beginning of the mortgage. The downside of an annuities mortgage is that you will pay more interest compared to a linear mortgage and in the long run pay more than a linear mortgage.
For what’s it worth, I went for the Annuities mortgage. Don’t worry too much, a good mortgage advisor in the Netherlands can advise you way better than yours truly on what kind of mortgage to choose in the Netherlands.
#5 What is the National Mortgage Guarantee aka ‘Nationale hypotheek garantie’?
You probably have seen this kind of complex term called National Mortgage Guarantee a few times now when you’re planning to buy a house, it’s beloved abbreviation in the Netherlands being the NHG. But what is this NHG?
The NHG is a protection against any debt that still stands if you can’t pay your mortgage due to involuntary unemployment, divorce or the inability to work. It will cost you 1% of the mortgage amount, but you’ll earn your money back quickly because lenders offer much lower interest rates if you opt for the NHG when sealing your Dutch mortgage. It’s not a play-safe-party for anyone though as the NHG is only available for mortgages in the Netherlands that are less than 265,000 euros (in 2018). Oh and by the way, the 1% payment is tax deductible!
Deduction is so seductive
Should you lose your job or something else awful, the people at the NHG and your bank will try to find solutions so that you are able to stay in your house (instead of selling), or – if you do need to sell – cover that left debt (this is when the selling price is lower than the mortgage amount due, doesn’t really happen in the Randstad anymore with all these rising housing prices).
So in short, you’ll pay less per month since the mortgage rate is like 1 point less, you’ve got a guarantee for the worst case scenario and you can deduct the cost from the tax man! Getting the National Mortgage Guarantee was a no-brainer for me.
#6 How much can I borrow for a mortgage in the Netherlands?
Ah! The million dollar question (more like 200-400K question)- how much can you borrow for a mortgage in the Netherlands? Let’s have a look at the most important factors for determining the height of your Dutch Mortgage.
The most important factor is your income, no surprises there! But there are plenty of subfactors, let’s list them all:
- Regular employment or are you an entrepreneur? Do you have a permanent contract (or a fixed contract with a letter of intent from your employer?) or in the other case – how long have you been an entrepreneur? Ultimately, the bank calculates the risk factor. The less risk, the better. If you have a permanent contract, it is seen as a lower risk, so you can borrow more. If you have your own business for more than 1 year, than there is something to work with. If your business is not up and running for so long (1 to 3 years), the banks requests an income statement from an expert party who can determine your income.
- Are you going to buy together? The income of your partner will of course be included in the plan. It helps if you’re married or registered as partners in any way.
- The house value is also a determining factor. You can not finance more than 100% of the home value. This means that in general the costs are for the buyer (‘kosten koper). Take this into account when you bid on a home (and certainly if you offer above the asking price).
- If we have determined the income and the house value, the interest comes into play; what is the interest rate? This, of course, includes a fixed-rate period and whether this is with or without NHG, for example.
How much can your Dutch mortgage be? Let’s play some numbers!
The Dutch Institute NIBUD has determined what someone can borrow with a certain income. All lenders use these figures, so these rules apply to everyone. What is still important when it comes to the maximum mortgage amount is that if you have bad credit or student debts, this has a negative impact on what you can borrow.
The good news for those of you reading this with student debts is that they’re seen as less heavy than credit cards debts and such.
How would getting a mortgage in the Netherlands work when you also have student loans to pay back? Imagine that you’re ‘allowed to pay 1150 euro per month on a mortgage’ but you also have student debts of say 16.000 euro. It’s then 16.000 x 0,75 = 120 euro per month LESS that you can borrow/ be allowed to pay. With other kinds of debts it’s even a factor ‘2’ instead of 0,75.
Long story short – if you have any serious debts it really helps to ask a mortgage advisor like Mortgage Monster for advice – they’ve dealt with all of these situations before.
#7 I want a Dutch mortgage! Where do I start?
Read this article and now thinking “Hey, I can get a mortgage in the Netherlands, it’s not the distant utopia I first thought DutchReview!”? Well, there are certain ways to get started then.
A. Get a rough idea of how much you can borrow with a Dutch mortgage. Mortgage Monster has this excellent tool for calculating your potential mortgage in the Netherlands, 30% ruling taken into consideration and everything.
B. If you’re a bit more serious about obtaining a mortgage in the Netherlands then Jan Thomas and his co-workers at Mortgage Monsters are happy to help you with a personal conversation to explore your possibilities for a mortgage in The Netherlands.
I can really recommend using an intermediary for securing a Dutch mortgage. Especially when this is your first time buying a house in the Netherlands. That way you don’t have to deal with the bank together, they get you the best rates and there’s somebody to hold your hand, figuratively speaking with what is arguably the biggest deal of your life.
They also know the situation at all banks and lenders, which is good because who wants to be depended on the advice of just one bank?
The first conversation with a mortgage intermediary like Mortgage Monster is for free and without any strings attached what-so-ever. It’s always a good idea to do this since an explanatory conversation like this will make things a lot clearer.
In case you do decide to let Mortgage Monster help you out with securing your mortgage in the Netherlands then they will go for that tailored approach you need. They can and will help throughout the entire process, thus from purchase to the sealing of the deal at notary and everything in between. It’s a one-stop shopping concept for buying a house and in case you’re wondering, most Dutchies use an intermediary as well since this stuff is complicated!
Mortgage Monster also gets you all the explanation and documents in English, which is really handy since this is all rather complex in English – let alone in Dutch. (Check out the Mortgage Monster website and fill out the contactform to set up a meeting!)
C. Buy a house – do all of the above
So that’s almost all we could tell you about getting a mortgage in the Netherlands. There’s more possible than you would think most of the time, and getting some expert help on obtaining a Dutch mortgage is always a good idea. Good luck and let us know about your endeavours!
DutchReview has worked together with Mortgage Monster to bring you this article on mortgages in the Netherlands in 2018