Some of the most frequently asked questions posed to a mortgage advisor:
1. How do I know if I earn enough money to be able to buy a house?
How much you can borrow depends on your income and also of the value of the property. Obviously a bank will consider your income, but also the value of the property you wish to buy. For this reason, the bank will always need a valuation report drawn up by an independent property valuator. A mortgage advisor can tell you how much you will be able to borrow on your income. For this reason you will need to bring a recent salary slip to the meeting with the financial advisor. If you are self-employed, the bank normally likes to see three years of annual figures and a recent income tax return.
2. Buyer’s costs, what are these? (k.k. = kosten koper = buyer’s costs)
It is best to budget for approximately 6% when you buy a house or appartment. This 6% consists of 2% transfer tax, 1% mortgage commission, approximately 1% for notarial fees and a valuation report, and somewhere between 1% and a maximum of 2% for the services of a real estate agent (not the seller’s agent, since he is paid by the seller).
3. Are (expat)mortgage payments tax deductible for tax payers in The Netherlands?
Yes, so far. We still have mortgage tax deduction in The Netherlands. However, it is only the interest payments that are tax deductible, not the capital repayments. And the interest payments are only tax deductible if the loan is used to buy, renovate, and/or improve the state of the property. If part of the mortgage loan is used for something else – like repaying an overdraft or paying for a car, the interest on this part is not tax deductible.
4. I do not have an indefinite contract of employment, but I would like to buy a house. Will I be able to get a mortgage?
You will need to provide the bank with a “Statement of Employment”, filled out by your employer. On this statement an employer can indicate if he wishes to grant you an indefinite contract after your current one expires. Alternatively, if you can show three years of previous income, the average will sometimes be accepted by banks as a sufficient indication of your income. And a couple of banks have a special “Expat arrangement” which allows most Expats to qualify, even if they are still on a temporary contract.
5. What is NHG (National Mortgage Guarantee) and would I qualify?
With a National Mortgage Guarantee you will enjoy a lower interest rate and if you are not able to make your payments through no fault of your own, the National Mortgage Guarantee will continue paying your mortgage to the bank.
To qualify, the purchase price must be € 231,321 or lower. The maximum NHG loan is € 245,000.
6. What are the pro’s and cons of a variable (versus fixed) interest rate.
For any 30 year mortgage period in the past, a variable rate has turned out to be the cheaper. If you compare the sum of all (variable) interest paid over this period with the sum of all (fixed) interest paid, the variable rate has definitely been the better option. However, your income has to be sufficiently high to carry potential variations in monthly payments and a variable rate may also cause sleepless nights. A five or ten year fixed rate (or even longer) gives stability to monthly mortgage payments. However, beware of fixing the rate for too long. There is no point in fixing it for 20 years if you intend to sell the house in five years or so.
7. Should I first sell my current house before buying a new one?
Up until two years ago most people would first buy a new home before putting their old home on the market. This was not too risky in a booming economy with a shortage of enough homes for everyone in The Netherlands. Although there still is a housing shortage, it takes much longer to sell a house in the current market than it used to. Thus you may subsequently find yourself in a situation where you will have to pay two mortgages for what might be a longish while. Quite a worrying thought.
If you first sell your old home, you will have a better idea of how much you can spend on a new home. In so doing, you might well have released equity after paying off the mortgage which could serve as a down payment on the new home. If you enjoy mortgage tax relief, be aware that a capital gain on the old home will affect the tax deductibility of the new mortgage. However, last but not least, if you do not have to sell your house first, you will find that you are in an excellent bargaining position in the current housing market!