Understanding the process of buying a home in the Netherlands without a mortgage
One of the trends emerging in response to the shortage of suitable homes to buy in the Netherlands is that of agreeing to buy a house without waiting for the financial side of things to be approved. But what are the implications of taking this radical step? The process is known as zonder voorbehoud van financiering, which means you are committing yourself to buy the property without the final say-so of a bank.
Cancellation clause
In the Netherlands, there’s no such thing as a mortgage pre-approval. That’s why many buyers bid on a property with a financial cancellation clause, so they can cancel the purchase without penalties if they don’t succeed in arranging the mortgage. By the way, you can also make the deal conditional on a structural survey.
So what are the pros and cons for buyers?
For a start, it could end up costing you lots of money. If you bid on a house or flat zonder voorbehoud van financiering and the deal falls through for financial reasons, you will have to pay a rather large forfeit – 10% of the purchase price.
This means, for example, if you agree to buy an apartment in Amsterdam that costs €600,000 and your bank says no, you will have to pay the seller €60,000 in compensation.
Six weeks grace
A draft contract that includes the clause ‘subject to financing’ usually gives you four to six weeks to sort out the money side of things with your bank. This is also the period in which you should carry out a structural survey of the property. You won’t have to pay either if you have a survey done on the property and it turns out to be structurally unsound.
And the pros?
If you are able to make offer that is not subject to financing in today’s market, it may well increase your chances of being the lucky buyer. If lots of people are bidding on a property, the seller may prefer the easiest option, and by making an offer without a finance clause, you are helping to make your offer as attractive as possible.
Talk to your mortgage advisor
Don’t forget, you also have a three-days cooling off period before the financial clause kicks in. And if one bank says no, you can always try a second one which might have different requirements.
As a mortgage advisor we will check your finances thoroughly before you make a bid and can tell you roughly how much you are able to borrow. And if we think you will get the mortgage you need, and if you have an indefinite employment contract or a statement from your employer stating they plan to offer you one, then we will usually be happy to approve waiving the financial clause.
The bottom line, and I cannot say this enough, is to get proper advice first.
