Expat mortgages in the Netherlands
Buying a property in the Netherlands is not just about finding and obtaining your dream home. If you require a mortgage (hypotheek), home buying also involves entering into a financial and legal agreement with a Dutch bank or institution.
On January 1, 2013 new rules for mortgages were introduced to safeguard homebuyers against running into excessive debt. The changes are listed below, along with other important information about mortgages in the Netherlands.
New Dutch mortgage rules
- Only annuities and linear mortgage models are eligible for the tax deduction on interest (renteaftrek), whereby the loan is paid off within 30 years via monthly repayments.
- The transfer tax (overdrachtsbelasting) is reduced to 2 per cent of the buying price. Previously it was 6 per cent.
- In 2015 the maximum mortgage value can be up to 103 per cent of the buying price. In 2014 the value was 104 per cent. By 2018 it will be reduced to 100 per cent.
- The temporary parental gift tax exemption (schenkingsvrijstelling) was extended until January 1, 2015. If you were between 18 and 40 years old you could receive a contribution from your parents of up to 100.000 euros tax free to buy a property. As of January 2015 homebuyers can still receive up to roughly 52.000 euros as a tax free gift to buy a property.
It has been reported that, from January 1, 2017, the maximum amount exempt from the gift tax may be raised to 100.000 euros once again.
- Conditions for mortgages existing prior to January 1, 2013 remain unchanged, however if you wish to increase an existing mortgage it will fall under the new rules.
- On July 1, 2015 the National Mortgage Guarantee (NHG) was reduced to cover properties with a maximum value of 245.000 euros. The NHG will be further reduced in 2016 to 225.000 euros.
- On January 1, 2013 the Dutch government eased the mortgage conditions for first time home-buyers if they expect an increase in income.
Mortgage tax relief (hypotheekrenteaftrek)
In the Netherlands if you have an annuities or linear mortgage then the interest on your mortgage is tax deductible and you will receive an annual or monthly tax refund from the tax office (Belastingdienst).
You are only eligible for mortgage tax relief when you are living in your property, if you are renting it out (while living abroad for example) then it is considered an investment for which you can receive no tax deduction on interest.
If your income level places you in the 4th tax bracket (with a tax rate of 52 per cent) then the tax rate at which you may deduct your mortgage interest will gradually decline.
In 2014 this rate has dropped from 52 to 51,5 per cent, and will drop by another half a percentage point in each following year, until it has reached 38 per cent.
Mortgages dating from before January 1, 2013 will not be affected.
Basic requirements for Dutch mortgages
For expats, banks require proof of income via a permanent employment contract and also a statement from your employer (werkgeversverklaring) giving details over your contract and income.
If you have a temporary contract, or work for a Dutch university as a PhD student or researcher, then you also need to provide this statement from your employer or institution that your position is ongoing or will become permanent. Templates of the form can be found online.
Remember that your statement still needs to be approved by your mortgage provider before your financing is guaranteed.
› Mortgages for self-employed persons
It is more difficult for a self-employed person (ondernemer) to receive a mortgage than for an employee, because banks consider entrepreneurs to be more risky.
Banks calculate your mortgage based on your net income of the last three years, for which you need to provide bank account records and income tax returns.
If you have been self-employed for more than three years then it will be easier to get a mortgage than if you have just started.
› Mortgages for EU citizens
If you are an EU citizen (but not a Dutch national) banks may require you to fulfil some or all of the following conditions:
- You have lived in the Netherlands for 5 years
- You have a residence permit
- You are employed and financially independent
- You may need to pay a deposit
- Your mortgage may be limited to 90 per cent or less of the property value
If you are able to provide a deposit then sometimes mortgage providers will not require you to have lived for 5 years in the Netherlands.
› Mortgages for non-EU citizens
Applicants from outside the EU will have similar requirements as for EU citizens, although banks may be stricter in enforcing them. Your may also need to prove that your residence permit can be extended.
Mortgage broker or bank?
Mortgages can either be taken out directly from a bank (or other institution), or via an intermediary such as a mortgage broker. Both banks and mortgage brokers charge a fee of roughly 2.000 to 3.000 euros.
With both banks and mortgage brokers it is important to enquire what services are covered. The first "orientation" meeting with a bank or broker is usually free.
› Mortgages from Dutch banks
Dutch banks such as ABN AMRO can provide you directly with a mortgage. They often divide their services into advice and handling fees, which you can find online under hypotheek advieskosten or hypotheek adviestarieven.
› Working with mortgage brokers
Mortgage brokers, like Expat Mortgages or Finsens, prepare a financial overview, investigate mortgage options with different banks, correspond with banks, compile and submit documentation and offer insurance. Mortgage brokers in the Netherlands usually charge a flat fee.
Additional costs when buying a house in the Netherlands (kosten koper)
The kosten koper (k.k) are all the additional costs that the buyer is obliged to pay when purchasing a property. The total cost depends on the value of the property, it’s around 6 per cent of the house price (estimate 12.000 to 18.000 euros).
The notary usually combines these costs and distributes the payments, so you need only come up with the money, but check to be sure. Many of these costs are tax deductible.
- Mortgage broker fee (hypotheek advieskosten) | 2.000 to 3.000 euros
- Real estate agent fee (makelaarscourtage) | 1,5 to 2 per cent of property value
- Transfer tax (overdrachtsbelasting) | 2 per cent of property value (prev. 6 per cent)
- Interpreter for settlement meeting at notary (tolk) | around 100 euros
- Building report if you are buying an older property (bouwkundig rapport) | 200 to 500 euros
- Notary fees including deed of property conveyance (kosten leveringsakte) and mortgage contract (hypotheekakte) | roughly 1.500 euros
- Settling amenities costs for the property with vendor such as balancing water, gas, electricity bills (verrekening zakelijke lasten) | 100 to 500 euros
Note that the majority of listed property prices are excluding kosten koper, so you will need to calculate an extra 6 per cent on top of the house price.
Freehold or vrij op naam (v.o.n) after a property price indicates that the extra costs are included in the listed price. This more often applies to recently built houses.
Types of mortgages in the Netherlands
The best mortgages for expats depend on lifestyle and personal circumstances.
With some mortgages in the Netherlands you immediately start paying off the loan along with interest, whereas other mortgage types allow you to postpone repayments and to pay only interest instead.
Since the changes in 2013 the only kinds of mortgages that are eligible for the interest tax deduction (renteaftrek) are annuities and linear mortgage models, whereby the loan is repaid within 30 years via monthly repayments.
› Annuities mortgage (annuïteitenhypotheek)
In the early years of an annuities mortgage your monthly payments are made up of a large part interest and a small part loan repayment.
Over time, as you are gradually decrease your debt, the amount of interest you pay also decreases. Towards the end of the mortgage period the balance reverses meaning you pay lower interest payments and higher loan repayments.
In the early years of the mortgage period, the annuities mortgage usually has lower monthly payments than a linear mortgage.
› Linear mortgage (lineaire hypotheek)
With a linear mortgage you repay a fixed amount every month, plus interest. Your debt is reduced every month which also reduces the interest.
A linear mortgage is useful when you want to pay off your mortgage as quickly as possible, although initial repayments are relatively high.
Other Dutch mortgage models
Alternative Dutch mortgage models are mainly variations on annuities and linear mortgages. As of 2013, if you take out one of these mortgage forms, you are no longer entitled to mortgage tax relief.
› Interest-only mortgage (aflossingsvrije hypotheek)
With an interest-only mortgage you make no repayments on the loan, instead you just pay interest on a monthly basis.
Banks only permit this kind of mortgage under certain circumstances, and you will need to repay the capital at a later date from savings or investment accounts. As of August 1, 2011, new mortgages cannot be more than 50 per cent interest-only.
› Credit mortgage (krediethypotheek)
A credit mortgage loan is a flexible mortgage. Similar to a normal bank account you can withdraw and deposit money. You pay monthly interest on the amount you borrow, which depends on the value of your house.
› Investment mortgage (beleggingshypotheek)
With an investment account mortgage you invest a certain amount into an investment or stock market account. This amount can be a lump sum, or a monthly or annual premium.
› Life insurance mortgage (levenhypotheek)
This mortgage combines a loan with a life insurance policy. You pay a monthly or an annual premium for life insurance plus interest on the loan. Over the mortgage term you do not pay off your debt but it is redeemed at the end of the term via the life insurance.
There is also a guaranteed version of this mortgage, with a guaranteed return that enables you to repay the loan at the end of the term.
› Savings mortgage (spaarhypotheek)
This type of mortgage offers a high level of security by linking a savings account to your mortgage.
You pay interest monthly and, instead of repayments, you deposit money into the linked savings account with a fixed interest rate that is equal to your mortgage interest rate. At the end of the mortgage term you repay the mortgage from the savings account.
› Hybrid mortgage (hybride hypotheek)
A combination of interest-only, savings and investment mortgages. You make interest payments but you have flexibility how you generate the capital to repay the loan.
During the course of the mortgage term you can switch between saving and investing, taking advantage of low interest rates and investment opportunities, or seeking less risk in a savings account.
The mortgage process in 8 steps
1. Before house hunting have a (usually free) consultation with a mortgage broker or bank to define your budget and if you will meet the requirements for a mortgage. At this stage you can get a good idea if you will be eligible or not.
3. Make an offer on a property. If accepted, you will meet the vendor at a notary’s office to sign the purchase agreement (koopovereenkomst). You may also be required to pay a deposit to the notary within a few weeks of signing.
This can be a money transfer of 10 per cent of the purchase price or it can also be a bank guarantee (often arranged by your mortgage broker or bank).
Ensure there is a clause that the agreement is non-binding if you can’t get the funding. Define the settlement period, usually between 30 to 60 days.
4. Apply for a mortgage. Mortgage broker or bank may offer insurance to cover the mortgage in the event of death.
5. Source and submit all necessary documents to your broker or the bank.
6. Attend the settlement appointment at the notary to sign property title deed with vendor and mortgage act with bank. The notary handles the money transfer.
7. Begin your monthly payments including insurance premiums if you selected them.
8. Move in and enjoy your new home!
Understand your mortgage
As expats can never be sure of how long they will live in a place, it is important to clearly understand the conditions of your mortgage. For example, is it possible to sell your property at any time? Can you repay the mortgage earlier than 30 years if desired?