WOZ Value of your home


The municipality is the executor of the WOZ law. WOZ stands for “Waardering Onroerende Zaken” and it is best translated as “Valuation of Property”. In January or February of each year home -owners receive a new assessment of the WOZ value in their letterbox. The purpose of the WOZ law is that it forms the basis for the calculation of different municipal taxes, such as property tax, income tax and water charges. Since 2007 a WOZ value has a validity of one year. Unless, of course, you object to your evaluation.

On a national scale, the WOZ-values have dropped on average 2,3% in relation to the previous year. The actual increase or decrease of the value of a home can differ regionally. In case you are in doubt about the WOZ value of your home you may want to consider filing an objection to the new value. Obviously this only makes sense if you believe that the WOZ of your home is too high. The credit crunch started out in August 2008 with the general expectation that one should now start to see the results of the crisis in the newly adjusted WOZ values. Please remember that an objection has to be sent to your municipality within six weeks after receiving the new notification. Should the WOZ assessment be way too low, the municipality reserves the right to adjust the value.

A new WOZ statement is normally combined with a property tax assessment, waste and sewer charge. You will receive the WOZ assessment if you are the owner of the property on 1st January. It is irrelevant if you are living in the property or not. In the case that you own the property with someone else, for instance your partner, the assessment is only directed to one of the owners. At special request, the assessment can be sent to more than one owner, but this will have to be applied for at the municipality.

The different taxes that are related to the WOZ value are: Property Tax (Onroerendezaakbelasting)  


This amount depends on a certain percentage of the WOZ. This percentage is determined by the municipality (and therefore differs from city to city).  


Income Tax (eigenwoningforfait)  


As far as the Tax authorities are concerned, a home-owner enjoys a fictitious income in box I. In other words, a percentage of the WOZ value (for most homes this is 0,55%) is added to your taxable income. So ,for example, if the value of your home is € 300.000, the fictitious income is 300.000 x 0,55% – € 1.650. The effect of this is that this part of your annual interest payment is not tax deductible. So if we continue with the same example, the numbers might look like this: Mortgage say € 300.000. Interest rate 5%. € 300.000 x 5% = € 15.000 – € 1.650 = € 13.350. So only € 13.350 is tax deductible instead of € 15.000. So if the WOZ value is too high in relation to the market value, it could be to your advantage to contest the value.  

Water and sewer charges


These charges are in the hands of the water and sewer authorities (Waterschap). The rate is dependent on the region in which you live, and the different tasks that this local authority has to fulfill. 


Inheritance tax  


For death duty purposes, the WOZ value is also relevant. However, death duty is a complex subject which will not be discussed in this article. 

You have now read how the WOZ value of your property affects different taxes. If you have received the new assessment, check if this is in accordance with your own view of the value of your property. Should you feel the WOZ value is not correct, you should object within six weeks. Feel free to contact us if you would like to receive an example of a letter, which you could send to your municipality. 




Expat? And you want to buy a house in the Netherlands?

You might think that you face a double hurdle: you do not hold a European passport and on top of that you have a temporary contract of employment. So what are the chances of obtaining a mortgage and buying your own house?  It always gives me great pleasure to tell those of our Expat clients who fall into this category: Yes you can! Even if they do not hold an indefinite residence permit.

Most banks have been defrauded in the recent past by untraceable Expats who abscond, leaving behind them large unpaid mortgages.  For this reason many banks are cautious about lending to non-Dutch nationals. However, information and data exchange between (especially European) countries has greatly improved, and moreover the modern Expat is generally highly educated. It has therefore been possible to restore the banks’ faith in Expats, and with it their readiness to provide mortgage loans to them. Provided , of course, that their mortgage application is handled professionally. Our company is specialized in this area, and whilst not every bank is equipped to deal with international clientele, we have managed to secure special deals with several banks for the international community in the Netherlands . So European or not, indefinite contract or fixed-term,  30% ruling or tax free salaries, it is normally possible to find suitable finance for most prospective home buyers, each with their own set of circumstances.

How do you know if you qualify?

How much you can borrow depends on your income and also of the value of the property. For this reason the bank will always need a valuation report drawn up by an independent property valuator. An impartial mortgage advisor can tell you how much you will be able to borrow on your income. For this reason it is advisable to bring a recent salary slip to a meeting with such financial advisors. If you are self-employed, the bank will normally request sight of three years of annual figures and recent income tax returns.

Do you qualify for tax relief on the mortgage interest payments?

Yes, but only if you pay taxes in The Netherlands. So even if you have 30% ruling, you can still benefit from tax relief on your mortgage payments. And it is possible to receive this relief on a monthly basis, thereby reducing your monthly mortgage payments. If you do not pay Dutch taxes because your salary is paid outside The Netherlands or because you enjoy a tax free salary, you cannot claim this tax relief. However, if your partner pays taxes in The Netherlands, he or she can normally claim the full tax rebate, even if you own the property together (and in some circumstances, even if the property is in your name only).

Can you also qualify for a mortgage if you do not have an indefinite contract of employment?

In most cases, yes. Your employer will need to fill out a Statement of Employment  indicating that you will be granted an indefinite contract after the current one expires. In cases where the employer is unable to make such a declaration, it will certainly help if you can show three years of previous income. Furthermore, the banks we work with make special allowances for several international organizations for whom temporary employment contracts are standard issue,

What is the procedure to follow if you want to buy a house or an apartment in The Netherlands?

After consulting your financial advisor, you will know what your budget is. The next step is to find your dream house, generally with the help of your own real estate agent. (Since the seller’s real estate agent’s job is to represent the interests of the seller, you may wish to consider hiring your own!). Once agreement has been reached on the purchase price, a Purchase Agreement will be drawn up. In the Amsterdam region this is done at the Civil Law Notary’s office, but elsewhere in The Netherlands this is normally done by the Real Estate Agents. After signing the Purchase Agreement, you have three days to change your mind. This is the so called cooling-off period. It is also standard to have a financial contingency clause in the contract. This means that you have a couple of weeks to secure a mortgage offer from a bank. If you are unsuccessful, this means that you can still get out of the Purchase Agreement by letting the seller  (or his Agent) and the notary know in writing before this financial due date. You will need two letters from two different banks denying you the mortgage loan. Your financial advisor will also be able to help you here. In normal circumstances, though, the mortgage applicant is rewarded with a mortgage offer and the next step is then to make a deposit of 10% of the house price. This 10% needs to be transferred to the Notary’s office or (and most commonly) the mortgage bank sends a letter of guarantee to the Notary’s office for this 10%.

The final date in the Purchase Agreement is the actual date of transfer of ownership of the property. On this date you become the owner and all rights and duties related to the property will transfer to you. You will go to the Notary’s office to sign both the deed of transfer of ownership as well as the mortgage deed on this day. An interpreter is normally present if you do not have a good command of the Dutch language. The dates in a Purchase Agreement should not be set too lightly or too tightly. The advice of a real-estate agent and that of your financial advisor can save you hassle and keep you safe from legal pitfalls.

The Coalition Agreement of 2010 and your Dutch tax bill


Holland finally has their new Government in place. A new minority coalition has been formed between two parties: the VVD (Liberals) and the CDA (Christian Democrats) with the support of PVV, the Freedom Party of the illustrious Geert Wilders. Although it was very difficult for these three parties to reach agreement on their intended governance of the Netherlands for the next four years, they certainly agreed on one thing: that deductibility for tax purposes of mortgage interest payments has to be respected and continued. This to the relief of close to 7 million home owners.

So now that the deductibility of interest on Dutch mortgage payments is safe for a goodly number of years, it is expected that some 150.000 doubtful would-be home owners will now definitely bite the bullet and buy the house or apartment they have been thinking about for awhile. And should you be one of those still in doubt, here are some facts to help you decide whether you should join them:

* The new Government wants to impose rent increases for council/municipality and social housing for anyone earning more than € 43.000 per annum in order to free up existing housing for those on lower incomes. Thus stimulating those on higher incomes to buy their own home.

* If you buy a property and you are also tax payer, all interest payments for the financing of the property and its renovation are tax deductible. Additionally,there are some other tax deductible costs you may incur during first year of purchase. These include the costs of actually getting the mortgage. The capital costs for the purchase of the property are not, however, tax deductible. Here is a list of the deductible and non-deductible costs.

Deductible costs:

* Mortgage interest payments, provided the property is your primary residence

* Interest payments for mortgage payments related to renovation of the property

* The cost of arranging finance, such as bank and/or financial advisor commissions

* Notary fees for drawing up the mortgage deeds and registering the property with the kadaster (land registry)

* Periodic payments for erfpacht (leasehold dues)

* Penalty charges if/when refinancing your mortgage

* Interest payments to the builder incurred for a newly built property after signing of the purchase agreement

* Fees charged for obtaining a National Mortgage Guarantee (NHG), if applicable.

Non-deductible costs:

* Repayment of the principal

* Payment of the premiums related to a mortgage savings account or mortgage-linked life insurance policy

* Real estate agents’ fees

* Transfer tax and Value Added Tax (B.T.W. – only applicable on newly built properties)

* Notary and land registry fees for the ownership deeds

* Interest payments to the builder incurred for a newly built property before signing of the purchase agreement

* The capital cost of the property and any associated renovation or home improvement costs  

* Interest payments and initial costs for any part of the loan which is not intended for the acquisition or renovation of the primary residence (such as might result from increasing the mortgage loan to buy a new car)

* If you have sold your primary residence and have a surplus value which you do not use to buy your new home, the interest payments on this part are not tax deductible. So for example: if you sold your previous house in The Netherlands for € 250.000 and the old mortgage was  € 210.000, then the amount of capital gain ( € 40.000), will not be tax deductible in a new mortgage. For this reason, most people use the surplus value of the old home to reduce the mortgage required for their new home (ie they reinvest the capital gain), even if the bank does not insist upon this.

So with the new Government securing mortgage interest tax deductibility for the foreseeable future and with interest rates still being low, many existing homeowners are highly motivated to sell their present home and so move on to the next one. Personally, I cannot think of a better time to make that long postponed decision….

Thinking of renovating your property?


Although the housing market is starting to pick up again, some house owners wishing to sell their house may decide not to wait any longer, deciding instead to renovate their current property. And now is a great time to do so. The BTW rate (VAT) for home renovations or improvements is temporarily reduced from 19% to 6%. The Dutch Finance Ministry has chosen to introduce this measure in order to give a boost to the housing market and the ailing building sector.

The property to be renovated has to be at least two years old and the BTW discount applies only to labour costs, not to building materials. However, labour costs are usually the largest part of the total building costs. Also, this temporary BTW reduction must not increase the profit margin of the builder, it being required that building companies pass on to their clients the total cost savings resulting from the reduced BTW tariff.

If you do decide to renovate that bathroom now or have that gorgeous kitchen installed, your mortgage bank may be prepared to help you. For small home improvements you may want to use your savings, but for major works increasing your mortgage could be a good solution. If you borrow money to improve your home, you are in principle (if you are a tax payer) entitled to deduct the mortgage interest on this loan.

So what are the possibilities? Well, you could:

  • increase your mortgage back up to its original amount if you have made capital repayments. You can check your mortgage agreement for this (or ask your financial advisor to help you do so), or
  • If your mortgage is for an amount higher than you actually borrowed at the outset, you may be able to increase your mortgage to this higher amount (again, check your mortgage agreement), or
  • increase your current mortgage loan or take out a second mortgage with the same bank, or
  • negotiate a separate loan (though this normally attracts a higher interest rate)

For the first two options, you do not need to involve a Civil Law Notary (Notaris) and thus this will save some money. To increase your mortgage or change mortgage banks, you will always have to involve a Civil Law Notary. On the other hand, if you are increasing your current loan, it may ge a good time to see if your current mortgage loan can be improved upon with regard to the interest rate you are paying or the repayment conditions. Maybe your current rate is above current market rates. Or maybe your investment portfolio is showing a disappointing level of growth and you want to consider more attractive guaranteed saving schemes.

If the new total mortgage amount is not higher than € 265.000 (including the renovation costs), then a mortgage with an NHG (National Mortgage Guarantee) can be a good option. An NHG offers a lower interest rate (up to 0,5% discount) and offers certain guarantees in case you lose your job, become disabled or in case of the death of a partner or spouse. Since the bank’s risk is a lot lower with NHG, they can afford to offer a lower interest rate. But NHG is only open to home owners or buyers with an indefinite residence permit in The Netherlands. (This includes nationals of all countries within the European Community).

There is another bit of good news for those considering a renovation project. From 1 September of this year, a new Arbitration Committee has been set up to deal with complaints about your builder. This applies to any building contracts that are agreed upon on or after 1 September 2010. But make sure that the building company you choose is registered with BouwGarant. Around 2000 building companies are registered with BouwGarant, and part of their website is in English. Go to http://www.bouwgarant.nl for more details.



“Banksparen” – a modern savings account with several possibilities and perks

 When I have an appointment with a client, we often meet at their workplace or home, or maybe my office. And sometimes, we agree to meet up somewhere central and combine business with pleasure. One of my clients recently suggested meeting at Bodega “De Posthoorn” on Lange Voorhout in The Hague, which he had chosen because of its traditional Dutch atmosphere and cuisine, occasionally served with an exotic new twist. It turned out to be a good choice offering a delicious lunch, and an ambiance steeped in a certain old-fashioned grandeur characteristic of The Hague, and a lot of history. The great-grandmother of our Queen Beatrix used to take her stagecoach from this location and, as I learned, had even had a tunnel built between “De Posthoorn” and the her Palace on the other side of Lange Voorhout – always handy to have a safe get-a-way.

Apart from this brief history lesson, my client wanted to learn about the modern way of saving money to repay a mortgage eventually while achieving the maximum tax rebate and thus, the lowest monthly payments. Such a savings account is called Spaarrekening Eigen Woning, or simply Banksparen.

Apart from saving up to eventually repay the mortgage, Banksparen can also be used as a savings plan for:

  • Additional/Supplemental pension funds: Any money saved into this account for pension purposes can be deducted from your income tax, if you are a taxpayer. Banksparen further allows you to defer payment of wealth tax on your savings until at a later time when the annuity is paid out periodically, and generally taxed at a lower rate.
  • The Golden Handshake: Some banks and insurance companies have set up special savings accounts for the so-called ‘Golden Handshake’. This is the severance pay that some employees may receive when they are made redundant. Although this amount is taxed when paid out, it is possible to transfer this money to a special savings account, which holds the Golden Handshake status. In this case, neither the saved amount nor the interest on it will be taxed until the agreed date when it will be paid out periodically.  
  • Funeral Expenses: Although not a particularly pleasant topic to discuss, it will also soon be possible to pay into a special savings account earmarked for funeral expenses.

Since my client’s main interest was the purchase of a home and which mortgage to choose, we focused on the benefits of this special Bankspaar savings account, in combination with a mortgage. How does this work in practice? Well, when you have a mortgage with a Bankspaar savings account, you pay interest to the bank, but you are not actually repaying the capital. Apart from the interest payments, you also pay a regular (normally monthly) premium into the savings account.  The interest rate that you pay on your mortgage loan is equal to the interest rate you receive on the savings account. In this way, you save up an amount that will be used to repay your mortgage at the end of the agreed mortgage period (normally 30 years). If you stick to a number of simple rules, this savings account will not be taxed in box III  – in laymen’s terms, wealth tax does not apply. Because you are required to pay into this savings account on a regular basis for a period of 20 years for it to be tax free, my Expat clients frequently ask me what will happen if they leave the country before the 20 years are up. Well in that case, a special tax exemption still applies. So, even if you are not planning to stick around The Netherlands for 20 years, a Bankspaar savings account may still be an excellent choice.

Of course, many Expats do not pay tax at all, and they cannot benefit from a tax rebate on their mortgage interest. (For my view on the future of mortgage interest tax deduction in the Netherlands, I refer you to last month’s article in The Times or check out my website at www.fvbdeboer.nl  “The Swedish model or going Dutch”.) But even for those of you who are lucky enough not to pay tax and therefore unlucky enough not to benefit from the tax rebate, the Bankspaar savings account mortgage normally gives a lower monthly payment than the straightforward capital repayment models. To be able to make a calculated and sensible decision, you should be well informed beforehand. After all, the choice of mortgage is just as important as the choice of the right house.

The Swedish model or going Dutch?

On 9th June of this year the Dutch will vote again for a new Government. And one of the main topics on every political party’s agenda is how to cut costs. Our Administration has to deal with a huge  budgetary deficit and the annual  “housing budget” has to be cut by 20%. Rental subsidies may be cut. But one of the easiest ways to cut the State’s housing budget is by limiting the tax rebate on mortgage interest payments. However, this could be the worst moment to do so.

Consumer confidence is just getting back on its feet and the mere possibility of a future cut in mortgage interest tax reduction, could be enough to frighten off the weak hearted potential home buyer. But is this fear based on mere emotion or on real facts and figures?

In Sweden the tax rebate on mortgage interest was abolished in 1991. And yes, the housing market took a plunge. But was this entirely due to the abolishment of the mortgage tax deduction? Probably not, since Sweden had other problems to deal with simultaneously. The exchange rate of the Swedish Crown was abominable at that point (affecting their export) and interest rates sky high. And after a plunge of 30 to 40%, the Swedish housing market recovered to a point that today house prices in Sweden are 200% higher than they were in 1991 and the big cities even have a shortage of houses.

It  looks as though the Dutch Government took a good look at what happened in Sweden and made use of lessons learned. Do we like the possibility of mortgage interest tax rebates being cut in the future? Well, what’s new.  Holland has gradually been cutting back on the mortgage interest tax deductions for several years already:

  • In 2001 it was decided that mortgage interest could only be deducted from income tax if the money was actually used to purchase or renovate one’s primary residence (and not one’s holiday home, cars, etc.). Furthermore the duration of mortgage tax deduction was limited to 30 years. (Prior to this date, home owners could enjoy life-long mortgage interest tax deductions).
  • In 2004 a new tax bill determined that if you had a surplus value in your home when selling it (the difference between the selling price and the amount of mortgage owing), this surplus would no longer be tax deductible in the mortgage of the new home.
  • A small part of the annual mortgage interest payments was and is not tax-deductible (so called “Eigen Woning Forfait). Up until 2009 this non-deductible part of the interest payments was maximized. This year, the maximization of this Eigen Woning Forfait (home ownership value) was abolished, thereby reducing the tax deduction of mortgage interest for houses worth more than € 1.6 million. To put it in plain English: if your house is worth more than € 1.6 million, your tax rebate will be reduced.
  • This year this “Eigen Woning Forfait” will be increased even more for houses with a WOZ value of over € 1 million. (WOZ value is not the real market value, but a fictitious value for tax purposes, determined by the municipality). Anyway, in layman’s terms, this means that for houses over € 1 million, the tax rebate on mortgage interest will be limited even further.
  • As from 2004 any surplus value in your old home would not be tax deductible in the new home. However, if you moved to a cheaper home, you could at least keep the original tax deduction of the old home. Well this advantage will also be abolished as from this year.

And although as a mortgage advisor I love the tax deductions on mortgage interest payments, I also understand that our Government has to find money in many different fields to cut their budgetary deficit.  Since 2001 our Government has very sneakily reduced the mortgage interest tax rebate, but obviously in a smart and gradual way, since it has not affected Dutch house prices. In Sweden, the housing market is healthier than it ever was before. I trust our Government to continue on their path of  very gradual measures to save money on their housing budget. Since doing it the slow and careful way,  we will keep our healthy housing market, without taking the plunge……………..

National Mortgage Guarantee (NHG)


What is National Mortgage Guarantee?

This is a guarantee provided by a special foundation (WEW, short for Stichting Waarborgfonds eigen Woning), to the mortgage lender (the bank). This guarantee means that the bank can claim repayment of the loan from this foundation, should the client be unable to repay the mortgage due to circumstances outside his or her own control.

How does it work?

Well, first of all you have to qualify. This means that your salary has to be sufficiently high to be able to get NHG. This is often the case, since the banks have similar criteria to calculate how much you can borrow on your salary anyway. However, the maximum NHG loan is € 265.000. Until 1st January 2011 (so for the rest of this year), there is a temporary maximum loan of € 350.000. Part of this amount is for the additional purchase costs that apply when buying a home. For an existing home 12% of the NHG loan is for these additional costs and 8% for a newly built home. In practice this means that an existing home may cost no more than € 312.500 if you wish to apply for NHG and for a newly built one the maximum purchase price is € 324.074. But remember, after 1st January 2011 the maximum NHG loan drops back to € 265.000. So loans over and above this amount cannot qualify for NHG.

Which other criteria do you have to meet?

First of all you have to have permanent residence (so either you are European, or you have a permanent residence permit). And you have to have an indefinite contract of employment.  Should you have a temporary contract, you will have to be able to show three years of income for the years prior to the year of application. The average of the income of these years has to be high enough to meet NHG criteria. Once all criteria are met, you need to pay 0,55% of the mortgage amount which will be paid into the NHG fund. This amount is normally part of the k.k. (buyers costs) and therefore integrated in the mortgage amount.

What is the bank’s advantage?

The bank has the security that should the client default on his mortgage due to unemployment, divorce, disability or death, the NHG fund will pay out the difference between the selling price and the mortgage. For this reason, the banks offer a lower interest rate to the NHG mortgage client.

What is your advantage?

The same security applies to the client. If the home owner cannot pay his or her mortgage due to the circumstances described above, first of all an additional loan for a maximum period of two years can ensure the temporary payment of the mortgage. This way his or her household has more time to prevent a forced sale. Again, this only applies if the financial problems are caused by divorce, unemployment, disability or death of the partner. This special facility can increase the mortgage by a maximum of 9% of the total mortgage sum. Once the income has been restored, the additional loan will have to be repaid.

Another big advantage is a lower interest rate. On average, NHG  loans offer a rate which is 0,5% lower than other fixed rates. The exact rate may differ depending on the mortgage bank in question.

Refinancing your current mortgage to NHG

This is possible. However, apart from having to meet the criteria mentioned above, the maximum NHG loan for refinancing cannot exceed € 265.000 (no temporary increase to € 350.000 applies). Furthermore, part of the new mortgage will have to be used for either home improvements, or to obtain (buy) a larger part of the house due to divorce or to pay off the land lease (erfpachtcanon).

How do you apply for NHG (National Mortgage Guarantee)

Contact us or your financial advisor. They will know the rules and regulations of NHG and tell you soon enough if you qualify for an NHG loan.

To fix or not to fix, that is the question …

Am I against variable interest rates? No, definitely not. As I explained, you pay a lot less interest over the mortgage period. But you need the financial flexibility in your income to be able to bear the payments should the rates go up. But this is also the case when fixing the rate. If you fix for 5 years, you could be faced, theoretically, with a much higher mortgage payment five years from now. So if your budget is tight, it may be worthwhile to fix for 10 years or so. But beware of fixing for too long a period! The average Dutch household moves every 7 years. And if you are an Expat and it is your intention to stay in the Netherlands for say a maximum of 5 years, it would not be wise to fix the rate for much longer than that!

“Shall I fix my mortgage interest rate or should I keep it variable?” is a commonly asked question in our daily financial advice practice. “Depends on the numbers” is my usual answer. Fact is that if one compares the sum of interest paid for a 30 year variable mortgage interest rate to that for a mortgage where the interest was fixed  for say 5 or 10 years at the time, the variable rate comes up trumps. This has been the case for any 30 year period in the past and will thus almost certainly be the case for the future. (Despite the fact that some unimaginable things have happened in the banking world in the last year or so).

According to the Dutch Central Bureau of Statistics, the difference in interest between a fixed and a variable rate has been approximately 1,5% since the Second World War. Normally, the longer one fixes the interest rate, the higher the mortgage interest rate will be. This is because the banks also do not know how market interest rates will develop in the long term and therefore safeguard themselves by applying a higher interest rate when they can no longer change it for some years. Continue reading To fix or not to fix, that is the question …

To buy or not to buy …

When might it be a good time to buy a house? When the housing market is shooting up (like it has been doing since 1990)? Or when we are amidst a financial crisis as we are today?

According to the Dutch Association of Real Estate Agents (NVM) there are currently seven reasons to buy a house right now. In this article I look at five of these (the last two regard why you should enlist the services of a NVM Agent). I follow this up by giving you some reasons why it could be better to wait on buying a house and I finish by giving my own personal view of things. Continue reading To buy or not to buy …

Temporary rental of your property

As most home owners are very aware of, mortgage interest rates are a major tax deduction. For those of us who are unlucky enough to pay tax, we get quite a bit of tax back when we have a mortgage to pay. However, if you rent out your home, you will lose the entitlement to tax deduction related to this property. However, the government has decided to give the housing market an additional boost. From 1st January 2010 it will be possible to rent out your property temporarily and when the tenant leaves, the entitlement to tax deduction will return. This measure will last until 2012 and will also be applicable for houses that were rented out in 2008 and 2009. Continue reading Temporary rental of your property