Mortgage Application Updates in the Netherlands for 2024
Every year in January new rules come into effect that can impact prospective homebuyers in the coming year. In 2024, we are expecting several key updates and changes such as adjustments in the National Mortgage Guarantee (NHG) limit and changes in the starter transfer tax exemptions. Here’s a comprehensive look at the notable updates shaping the mortgage application process in the Netherlands this year.
1. How much can you afford to pay in monthly mortgage expenses?
Your maximum mortgage depends on your income and value of the property you are buying. How much exactly you can borrow on your income will be slightly amended next year. This has to do with the fact that other expenses such as heating or electricity have become more expensive, leaving less to pay for your mortgage. Depending on your income, for most potential home buyers this measure will decrease your borrowing capacity with 1% to 5%. If in the past year you received a salary increase of a few percent or more, then this positive change should offset the effect of this new measure.
2. NHG Limit Increase to 435.000,- euro
The National Mortgage Guarantee (NHG) is a government-backed scheme designed to protect both lenders and borrowers in the event of financial difficulties. In 2024, the NHG limit will be increased to 435.000,- euro. As of December 2023 homebuyers opting for an NHG-backed mortgage can secure this guarantee for loans up to the new limit, providing an added layer of security and lower interest rates compared to a regular mortgage. Note that the new limit does not only apply to new purchases. Current home owners with properties worth less than the new limit can also benefit from this by refinancing their regular mortgage for an NHG mortgage (only possibly in combination with a mortgage increase for renovations).
3. Transfer Tax Starter Exemption for Buyers Under 35
One of the significant updates is the extension of the transfer tax starter exemption for homebuyers under the age of 35. Previously, this exemption applied to properties up to 440.000,- euro, but in 2024, it will be raised to 510.000,- euro. This adjustment aims to ease the financial burden on young buyers, making homeownership more accessible for this demographic. We already have clients that have been buying homes up to the new limit over the past few months with delayed transaction dates for January 2024 in order to benefit from the exemption.
4. Additional Borrowing Capacity for Single Persons
Single individuals entering the housing market will benefit from a rule update allowing them an extra borrowing capacity of as much as 16.000,- euro. This adjustment acknowledges the unique and difficult financial circumstances of single applicants in the Netherlands and aims to provide them with increased flexibility in securing mortgage financing. The additional borrowing capacity can contribute to making homeownership a more viable option for those navigating the real estate market on their own. Nevertheless, for a single person with a mean income of 40.000,- euro the maximum mortgage will be 185.000,- euro next year, which in most Dutch cities will not get you very far.
5. Energy label will impact your borrowing capacity
As of 2024 the energy label of a property you are interested to buy will also impact your borrowing capacity. A property with an A or B label will for example increase your borrowing capacity with 10.000,- euro while a property with a A+++ label will for example increase your borrowing capacity with 30.000,- euro. This measure will push demand for energy efficient homes up and will also have an effect on affordability of new build properties. Read our previous article on this subject for more detailed information.
6. Student Loan Impact on Mortgage Applications will Change
A change with mentioning for applicants with outstanding student loans in the Netherlands, is that as of next year, mortgage providers will be looking at the monthly loan repayment amount rather than the initial loan amount. This will benefit those who have made extra payments to pay of their student debt with an increase in their mortgage eligibility amount.
7. 30% Ruling Update for 2024
Many of our clients have a 30% ruling. This is a tax advantage that allows skilled migrants to receive 30% of their salary tax-free for a period of 5 years. In 2024, there will be updates to the 30% ruling as put forward by the Dutch government in the tax amendments for 2024. The key change will be that for new 30% ruling applicants, the first 20 months 30% of the salary will be tax free, followed by another 20 months where 20% will be tax free and a final 20 months where only 10% will be tax free.
For expats that already have a 30% ruling there is a transition period so they will not necessarily be impacted. However, in a situation for example where an expat with an old 30% ruling switches employment after 24 months and applies for a new 30% ruling this will have an effect for the remaining 36 months (an additional 16 months at 20% tax free and 20 months at 10% be will granted instead of 36 months 30% tax free).
All though in the past the 30% ruling only had a minimal effect upon the maximum mortgage capacity of expats, the update will likely also mean it can no longer be considered in a mortgage application at all. Small side note: the Dutch senate is voting on this measure in the coming week and there are talks about that maybe the decision should be reversed again in 2025.
In conclusion, the mortgage application process in the Netherlands in 2024 reflects a series of updates aimed at enhancing accessibility and flexibility for a diverse range of homebuyers. From increased NHG limits to adjustments in transfer tax exemptions and special considerations for single applicants, these changes are designed to adapt to the evolving needs of the housing market. As always, prospective homebuyers are encouraged to stay informed and you can always seek our professional advice to navigate these updates successfully.
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