Dutch mortgage changes in 2023

With the year almost over it is time to look at the changes that lay ahead with regard to buying a property and obtaining a mortgage.

1. NHG limit will increase with € 50.000

 

NHG stands for the Dutch National Mortgage Guarantee foundation. They offer property owners a safety net if they can no longer afford their mortgage or if they sell their property and have a residual debt to pay. Right now you can apply for an NHG mortgage (at a one-off cost of 0.6% of the mortgage amount) if the property is valued up to € 355.000. To make this more accessible the limit will increase to € 405.000 as of January 1st. If you want to add in energy saving measure on top of the purchase the limit is even 6% higher at € 429.300. Also good to know, you can already buy a property now in December and ask the mortgage provider to wait till approving your application straight away in 2023 so you can make use of this deal.

2. Tax free gift limit will decrease

 

Currently home buyers up to 40 years in age were able to receive a one-off tax free gift up to € 106.671. As of 2023 this limit will decrease to € 28.947. The government has decided to change this to allow for a more equal playing field between home buyers with wealthy or not so wealthy parents. For gifts over this limit the tax will be at least 10% over that part.

3. Transfer tax limit starters and investors

 

Starters in the housing market are offered a tax exemption on the transfer tax. Right now this applicable for homes up to € 400.000 in value. There are some criteria you must meet, you are under 35 years old, plan to live in the property yourself and have not received this exemption before. As of 2023 the limit will increase to € 440.000. 

For private and business investors buying properties the transfer tax will increase from 8% to 10,4% as of January. By increasing this further the government hopes first time buyers will have a more competitive position to purchasing a property. If you buy a pied-a-terre or a holiday home in The Netherlands the higher transfer tax will also be applicable for you.

4. Mortgage interest tax rebate

 

Next year the mortgage interest tax rebate is being reduced further to the lowest tax bracket of 36,93%. This means that if you have a high income and are paying income tax of 49,5% (income over € 73.071) you can now only get the tax rebate of 36,93%. This is a measure that has gradually been implemented over the last years and the purpose is to not give home owners with a high income a greater benefit of the mortgage interest tax rebate.

5. Effect of student loans during a mortgage application

 

If you have a student loan that you are still paying back, you can borrow less in a mortgage. However the impact of the student loan is less that for example a personal loan with a bank or private lease car. For those loans the weight factor is 2%. As of next year the student loan weight factor is 0,65% for the old student loan system and 0,35% for those with a new student loan system. An example, ff you have a student loan (new system) of € 20.000 the impact on your borrowing capacity is about € 14.000 negative.

Get in touch

 

Lets us know if you want to discuss how these changes will affect your personal situation and mortgage eligibility.







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5 frequent questions by first time buyers

What does the process look like when I want to buy a house?

 

The first step is a good preparation. You should have a clear view on what are you looking for and if for example you want to be advised by a real estate agent. Get in touch with your mortgage advisor to determine what your maximum mortgage is so. On the Dutch website Funda you can find the most extensive list of available properties on the market. Next you can visit a property and check all the documents. If you want to proceed you can put down an offer and conditions such as a financial clause for a mortgage approval or whether or not you want to include a technical inspection. If the seller accepts your offer, a provisional purchase agreement will be drafted by their agent. Once this is signed by both parties and you have a valuation report we can submit your mortgage application. Upon approval of your mortgage application you need to wait till the agreed transfer date. The notary will prepare the legal documents, such as the mortgage and transfer deed. They will also oversee the financial transaction and make sure you get the keys.

 

How much money do I need to bring in myself?

 

In the Netherlands you can finance up to 100% of the property value with a mortgage. Any additional costs you need to pay for yourself. The main costs are for your agent, your mortgage advisor, your notary and valuation. Often you also have to pay transfer tax which is mostly 2%. If there is a difference between the purchase price and the valuation you also need to cover this difference. Mostly we see clients paying between 4 to 6% from their pocket, but it really depends on the circumstances.

 

Is it wise to take out a mortgage at the maximum of my loan capacity?

 

It can be tempting to take out a mortgage at the maximum of your capacity. But if you have a high mortgage it means your monthly interest and loan repayment will also be high. There are risks involved and you should always discuss this with your mortgage advisor. 

 

Can I take out a mortgage if I have a student loan?

 

If you have a student loan you can often still get a mortgage. It does impact your maximum mortgage amount, but because of the low interest and weight factor in the calculation this is often manageable. We are happy to calculate this for you.

 

Do I meet the requirements for a NHG mortgage?

 

The purchase limit for NHG (translates National Mortgage Guarantee) is 355.000 euro in 2022 and will increase to 405.000 euro on January 1st 2023. With a NHG mortgage you get a better interest rate and have extra protection in case of certain situations. Besides this limit there are some other factors that determine if your qualify for NHG. For example:

 

  • You need to pay your full mortgage back on a linear or annuity scheme (interest only is not an option)
  • If the valuation points out much maintenance is needed you are required to also arrange a technical inspection
  • To prove your income an employment statement is always required (other documents are not allowed)
  • Bonuses/allowances are often not allowed in the calculation for your maximum mortgage

With NHG it is important that the financial benefit of the better interest rate outweighs the costs to obtain the NHG mortgage (0,6% of the mortgage amount). 

Anything unclear? Send us a message and we will get back to you asap. 







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How does the energy label impact the price of a Dutch property?

According to the NVM (a Dutch real estate agent association), housing prices for energy efficient homes outpaced those with a lower energy efficiency. These properties are also on the market for a shorter period of time and buyers are more keen to overbid on them.

 

The NVM analysed the energy labels of over 10,000 properties that have recently been sold to come to these conclusions. According to the association the findings are directly related to the energy crisis as a result of the war in Ukraine. Potential energy costs play a more important role when selecting a property and deciding how much to bid on it. The sales volume of “green houses” did not contract as much as other properties.

 

Energy labels in the Netherlands

 

All homes in The Netherlands have an energy label. This label gives you an indication how energy efficient a property is compared to a similar property. The labels range from A to G, where A to C is generally considered energy efficient and D to G not so.

 

The impact of the energy label on the price of a Dutch property

 

The biggest difference occurred in properties that have the least energy efficiency label G vs label C. A property with label C on average sells for 12% more than one with label G. On an average property this is a difference of € 50.000,-. Just last year the difference between the prices on these properties was 8%. A jump from label E to label B also shows an increase in difference of 10% this quarter. The difference between label A and C remains rather flat at 5,5%.

 

Agents have been aware for a longer time that energy inefficient homes are in less demand despite the already lower asking price. This because it is difficult to find a contractor and building materials have also increased in price. So it is not just energy costs but also building material prices that impact energy inefficient homes the most.

 

A practical example

 

The association gives a practical example in their analysis. A 1930’s property in Amersfoort with energy label E. In the same street there is an identical property with label A, renovated with floor, wall and roof insulation, solar panels and a hybrid water pump. This adds €75.000,- in value, which is a 14.3% more value than the E label property.

 

The difference in value is the largest in regions with less demand for properties. On the Dutch market this is the case for the city of Enschede, far out east in The Netherlands. Here changing your energy label from G to C will give you +15% in extra value. In contrast, in Utrecht the same jump will only give you +10% extra value.

 

Final thoughts

 

Our team has a tip for property seekers. When you receive property documents from a selling agent always check the owner’s questionnaire. Here you can find information on the monthly energy bill of a property. But rather than just looking at this figure also check how much energy was consumed last year by the household. Multiply this by the current energy prices and you will have an accurate picture of what you can expect rather than what the seller is paying right now.







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What can you expect in a mortgage intake meeting?

Before you start viewing potential properties to buy it is a good idea to get insight in your financial capabilities. The main question is often “how much can I borrow?”. But besides this there is much more to discover with regard to mortgages.

 

Our mortgage intake meetings are always free of charge and do not lock you down to do business with us. Rather, it gives us the opportunity to assess your situation, give information on your possibilities and the services we provide.

To assess your situation you need to answer the following questions:

 

  1. If you are from outside the EU, what type of residence permit do you have?
  2. What is your age?
  3. What type of employment/contract do you have?
  4. What is your current income?
  5. Do you have any outstanding loans or bad credit history?
  6. What is your current living situation (already own a home or renting)?
  7. If you already own a home, what is your property value, how much is your outstanding mortgage and how long have you received a tax rebate?

What are your possibilities:

 

  1. Are you eligible for a mortgage?
  2. How much can you borrow?
  3. What are the interest rates?
  4. What are the different repayment schemes?
  5. Are you entitled to a tax rebate on your interest payments and one-off mortgage expenses?
  6. What other costs will you encounter when you buy a property?
  7. What will your monthly costs be when you buy a home for a certain price?

What services do we provide:

 

  1. What is the difference between going to an independent mortgage advisor and a bank?
  2. What fees do we charge?
  3. How long does it take to get a mortgage approved?
  4. What does the process look like from start to end?

In contrast to what some mortgage advisory firms do, we do not ask you to sign a service agreement after an intake meeting but only at a later stage when you have bought the home and our work really starts. Till that stage we think it is a good idea that you are free to explore what options there are and change your mind if you are unhappy with your advisor. An intake meeting is generally 45 to 60 minutes and can be done in person, by online video chat or phone.

Independent mortgage advice

 

As our clients are all expats and mostly do not speak Dutch or have a thorough understanding of the process of buying a property in the Netherlands and how it works with mortgages, you can expect a very high level of guidance from us throughout the whole process. We provide clear explanations for any questions you have and go through all the main documents together with you. We also have access to all mortgage providers in the Netherlands, so we can advise you what the best option is out for your situation in regard to interest rate, terms & conditions and application process. This is what sets us apart from arranging a mortgage through a bank or even other independent mortgage advisors. 

 

Click here if you want to book a mortgage intake meeting!







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An overview of changes for Dutch mortgages in 2022

At the start of every new year there are some changes in the rules concerning mortgages. We have summarized the main changes that impact home owners and new mortgage applications.

1. Tax rebate on mortgage interest payments and expenses

 

The tax rebate on mortgage interest payments will drop for home owners with an income over EUR 69.398. Right now the rebate is 43% but this will drop to 40% at the start of the new year. Similarly the tax rebate will also drop on the one-off mortgage expenses such as a valuation, mortgage advice and mortgage deed & registration fees.

2. Transfer tax

 

The new transfer tax exemption for buyers under 35 buying a property up to EUR 400.000 in which they intend to live will remain 0% (instead of 2% or 8%). If you have previously received this exemption you cannot get it on your next property.

3. NHG limit & commission

 

Next year you will be able to apply for a NHG mortgage on properties with a value up to EUR 355.000 (currently the limit is EUR 325.000). The commission you pay for the NHG mortgage will drop to 0,6% of the mortgage amount (right now this is 0,7%). You also get a tax rebate on this commission. If you want to finance energy saving measures on a NHG mortgage the limit is in total EUR 376.300.

4. Impact of a private lease car on your maximum mortgage

 

If you are personally leasing a car all mortgage providers consider this as an outstanding loan during a mortgage application. Till now 65% of the lease agreement value was registered with BKR (the Dutch credit registration institution), but will now be listed for 100% as of April 2022. If you have a private lease car this make a big difference on your maximum mortgage (expect to be able to borrow EUR 50.000 to EUR 150.000 less).

Get in touch

 

Lets us know if you want to discuss how these changes will affect your personal situation and mortgage eligibility.







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Buying a new-build property 

The housing market in The Netherlands is very competitive. Every property that comes on the market is sold in no time with many bidders competing pushing prices up. In this article we will summarize some of the main points to consider if you might be interested in buying a new-build property. 

Advantages of a new-build property 

 

    • Bidding on a new-build home is unusual. The price for which the house is for sale is the purchase price. So you don’t have to worry about overbidding! You can also buy a new-build home V.O.N. (vrij op naam) which means no additional costs payable by the vendor. You therefore do not pay any transfer tax which is mostly 2%.

 

    • Buying a new-build property also allows you to customize the lay-out. If you buy a property from the start within a project, you still have the opportunity to make your wishes known. Whether it is two or three bedroom which you prefer, a living room extension or creating extra storage in the attic. On top of that the house can be furnished completely to your own style: kitchen, bathrooms, floors, doors etc. 

 

    • A new-build property must meet high standards. New properties often have a better energy label than A. You save a lot on your energy bill here. You will also receive a discount on your mortgage interest at a number of banks when you purchase an energy-efficient property. When buying a new-build home, you have little or no maintenance and warranty in the first few years.

Disadvantages of a new-build property 

 

    • New projects often work with a lottery. If you meet the conditions, you can indicate your desired construction number, sometimes several preferences. You will have to be patient and see if you are one of the lucky ones and whether you will also be offered the desired property.

 

    • You also often have to wait for some time before you can move into your home. On average, it takes a year, but there are certainly projects that take two years.

 

    • You must take into account your current monthly payments for your current home and the new mortgage payments during the construction period. As soon as the mortgage has been approved and construction has started, you can go to the notary. At the notary you sign the deed of transfer for the land and your mortgage is registered in the land register. You then officially have a mortgage in your name, the mortgage amount becomes available and you pay mortgage interest and repayment every month. You typically only pay the interest on the amount withdrawn from the mortgage. In the beginning this will only be the sum of the land costs. You pay for the construction in installments. You will receive an invoice every time a part of the property has been completed. On average, the construction cost is split into 10 installments. So, you pay your mortgage every month even though you have not yet moved in. You may be able to co-finance the mortgage costs in your mortgage during the construction period.

 

    • Lastly, the delivery date may be postponed due to delays. Construction companies are currently short of materials and workers. So always take into account delays!

Our new-build mortgage specialists are happy to help you

 

One of our new-build mortgage specialists would be happy to tell you everything that is important if you are interested in new-build projects in The Netherlands.







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Refinance your mortgage – explained for expats in The Netherlands

Mortgage interest rates in The Netherlands are currently very low. In fact they are lower than they have ever been and it is expected that they could be increasing again according to forecasts of banks such as ABN AMRO and ING. This means there could be an interesting opportunity for home owners to refinance your mortgage and get long term security and lower monthly payments. In this blog we will explain how refinancing works and what the pros and cons are.

Why is now a good time to refinance your mortgage?

 

If you have already had a mortgage for a few years your interest is likely locked at a higher interest rate than current rates. If you would refinance your mortgage it means your monthly mortgage costs would decrease. By choosing to fix your interest for a longer period of time such as 10, 20 or even 30 years, you can get long term security on your monthly payments and lower expenses. 

When is refinancing an interesting opportunity?

 

With low interest rates and the expectation of higher rates in sight it is possible to get lower monthly expenses and security for a longer period of time. But also if you are getting close to the end date of your current interest fixed term but don’t want to run the risk of rates increasing in the meantime, now is a good time to check what the options are with refinancing. We also have many clients that want to renovate their home and choose to combine refinancing their mortgage with a mortgage increase to pay for these renovations. Often in this way you could end up with lower monthly expenses, your renovations paid for by your mortgage provider and more security. 

When is refinancing a bad idea?

 

The goal is to get more security and or lower monthly expenses. If the penalty to cancel your current mortgage and other costs is large compared to the benefit of the lower interest rate you could get it might not make sense. We can calculate for you how quick you can earn the penalty back. As an expat you might also have expectations to be moving abroad again in the near future. In that case refinancing does not make sense as you would be paying for security you are not planning on using.

What costs will you need to pay when you refinance your mortgage?

 

The first expense you will come across is a penalty to cancel your current mortgage. How much the penalty will be depends on the outstanding mortgage amount, how long your mortgage interest rate is still fixed and the difference between actual interest rates and the one you are paying. You can always ask your mortgage provider what the penalty would be and if we helped you with your last mortgage we can even check for you. If you want long term security, in most cases you are better of refinancing. 

 

Next to the penalty you will also have to pay your mortgage advisor and in most cases you need a new valuation and go to the notary. All together the expenses can add up but you should know that these expenses are tax deductible and in many cases if your income allows it can also be included in a refinance and mortgage increase combination. We even work with a mortgage provider that will allow you to also refinance your personal loans into your mortgage over a 30 year period and against a much better interest rate. 

How can we help you?

 

We understand if this all can sound puzzling. That’s why we are here to help you figure it out by giving you insight in your options and our professional advice. Just know that our goal is always to get you lower monthly expenses and more security and we are here to share our expertise.







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How long should I fix the interest for?

This is something clients often don’t think too much about. Yet, it is a strategic decision of what best fits your situation vs the costs. Generally, the longer the interest is fixed, the more security you get, but it comes at a price. We will explain the options out there and give advice for different type of situations.

 

Within the 30 year duration of a mortgage you can decide to fix the interest for different periods of time. By fixing the interest you will have security that the interest rates and your payments don’t constantly change. You can fix it for different terms such as 1, 5, 10, 20 or even 30 years.

 

Interest rates are right now at an all-time low. Many people in The Netherlands therefore think it is the perfect opportunity to fix it for a long period of time. We would like to point out some reasons why this is not necessarily true:

 

  1. Fixing your interest for a longer duration comes at a price. For example, the difference between a 10 and 20 years interest fixed terms is about 0,4%. So even if the rates would be a little bit higher after 10 years and you need to renew, in many cases you would only have been better off going for a 20 years rate after about 13 or 14 years.
  2. If we look at the historic interest rates in The Netherlands of 1, 10 and 20 years, you would always been best of to never fix the interest longer than 1 year. By doing so, you would have saved a huge amount in interest payments. But who knows what will happen in the future.
  3. Even though rates are at an all-time low, we cannot look into the future. You wouldn’t be the first person who though that was the case already between 2015 and 2017 who now realizes that rates are about half again and regrets fixing it for so long. Many banks are also anticipating that the interest rates will also remain very low for the medium term.

Some general client situations and our advice:

 

      • Young clients: we often recommend fixing your interest for 10 or 20 years so you don’t have too many risks. If you decide to move house, you can choose to take your mortgage with you or cancel it without any penalty and apply for a new one. If the interest will then be lower, you should go for the last alternative.
      • Elder clients: we often recommend fixing your interest for as long as possible. In this way once your retirement starts, you will not have any nasty financial surprises.
      • Clients expecting to move abroad again: If you are planning on either selling or switching to a buy-to-let mortgage in the foreseeable future, you will be best of fixing the interest for 1, 3, or 5 years. You will be charge less interest and if you would want to switch to a buy-to-let mortgage, the penalty for cancelling your mortgage could be substantially lower with a short interest fixed term.

The above are some general situations but do not apply for everyone. If for example you are very risk averse, then you should probably not fix your interest for just 1 year. Important questions you should be asking yourself are how long you intend to live in the home, how much risk is acceptable and if you can manage higher mortgage expenses if the interest rises.

 

Most of our clients fix the interest for 10 years, which is the sweet spot between a good rate and security. Something else which could make a difference for you is, that if you want to fix the interest for less than 10 years, your maximum mortgage borrowing capacity drops with about 25.000 – 50.000 euro. So for clients that want to borrow at their max fixing the interest shorter than 10 years is not even an option.

How can we help you? 

 

Our mortgage advisors would love to give you personal advice on this topic. 







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Investing in Dutch real estate and buy-to-let mortgages

Buying a property to rent out is a very interesting opportunity right now. Savings rates are incredibly low at 0% and the real estate market In The Netherlands is booming due to the shortage in homes. If you have savings this opportunity is definitely something you can consider. But is this also possible if you do not have (so much) savings? This is where a buy-to-let mortgage comes into play and our role as an independent mortgage advisor to show you what is possible.

So what is a buy-to-let mortgage?

 

With a normal mortgage you agree to specific terms set out by banks. You may not rent out your property. Reason for this is that your property will be valued less with a tenant in it and they have tenant rights to protect them. A bank doesn’t want to your property to be valued less as this is a risk towards them.

 

A buy-to-let mortgage is specifically designed for investors that want to buy a property to rent out. You will receive a rental income from your tenants and on top of that the property value could increase over time. On the other side you will have to repay your buy-to-let mortgage and pay interest over the money you will borrow.

What are the requirements for buy-to-let mortgages?

 

The rules around buy-to-let mortgages are similar to those around regular Dutch mortgages, but there are some key differences:

 

  • Interest rates on buy-to-let mortgages are approximately 1% higher compared to regular mortgages
  • With a buy-to-let mortgage the bank requires a down payment of approximately 25% of the property’s rented state value (it can vary between 20-40%).
  • Stricter affordability checks compared to a regular mortgage
  • Most buy-to-let mortgages are on a full repayment scheme, but in some cases (partial) interest only is also an option
  • There are far less banks / mortgage vendors offering buy-to-let mortgages then regular mortgages
  • Higher fees for the valuation and mortgage advice

Any other ways to invest in real estate?

 

Yes. If you already own a home you could also check how much equity you have in it. You need to know the current value and subtract the outstanding mortgage amount. You could then increase your mortgage (if also possible on your income) with your current bank or choose to increase and refinance with another party. In all cases this way your interest will be lower than with a buy-to-let mortgage.

What about tax?

 

In the Netherlands rental properties are considered financial assets, which is taxed in Box 3. Therefor the rental income is not taxed in Box 1. There are different brackets in Box 3, so depending on how much financial assets you have you will pay a certain percentage.

Since January 2021 the transfer tax (stamp duty) on investment properties increased from 2% to 8%. This tax is on top of the 25% down payment.

How can we help you? 

 

Let us know if you want a referral for an appraiser or to book a free session to discuss your buy-to-let mortgage options. We are happy to help! 







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Opportunities for homeowners in an overheated market?

Housing prices have steadily been increasing over the last few years in The Netherlands. What started with the bigger cities has now shifted towards the whole metro area “Randstad” and even more remote towns. Interest rates have been dropping and it looks like there is not much room to go any lower. How can this market situation benefit expat homeowners in The Netherlands? We can help you lower your monthly expenses by checking if your mortgage risk category is up to date and or by doing an analysis on the financial implications of moving to a new home.

Updating your mortgage risk category

 

If you originally financed more than 70% of your property value in a regular mortgage (for NHG mortgages this is not possible), then there is a big chance  you are still paying a surcharge for the risk category of your loan-to-value. Banks often (for example ABN AMRO and ING) do not update this automatically whilst you are paying your mortgage back. On top of that, with current prices increasing year after year you can expect your property has also significantly increased in value.

 

It can pay off to conduct a new valuation on your property or see what your yearly WOZ value is. If either of these states have a higher value then the market value at the time of buying, you should inform your mortgage provider. This will lower your loan-to-value and potentially update your risk category which can save you quite some money per month. 

Moving to a new house

 

Another way to lower your monthly expenses is to move to a new house. When you move you can cancel your current mortgage without a penalty. A new house in a slightly higher price range will in many cases lead to lower monthly expenses as interest rates are now lower than ever. You can also take your surplus value with you in a bridging loan if you have not sold your property yet. For example:

 

You own a home worth € 500.000. Your initial mortgage was set up in 2016 for € 300.000 with an interest of 3%. Right now your outstanding debt is € 250.000 and your monthly gross payment is € 1.265. If you would now buy a new home worth € 600.000 you could bridge € 250.000 from your current home and only require a mortgage of € 350.000. Due to the low loan-to-value you could get an interest of around 1,2% which would give you gross monthly expenses of € 1.158. So your gross payment per month would drop € 107 and you get a housing upgrade.

How can we help you? 

 

Let us know if you want a referral for an appraiser or to book a free session to discuss your mortgage options if you are considering moving house.







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