New legislation and regulations in the financial sector have made banks more reluctant to grant mortgages. These rules have been particularly strict for expats, self-employed workers and people aged 60 years and up.
That means that for a growing group of people, banks no longer offer any financing solutions for purchasing property in the Netherlands. These requirements will most likely remain in effect for the foreseeable future, and they may even be tightened further.
Fortunately, there is a viable alternative in the form of mortgages funded by private investors.
To determine whether you are eligible for a mortgage, a bank will assess your income. The following factors will be taken into account, among others:
› nationality (EU citizen or not)
› whether you have a social security number (BSN)
› whether your income is in euros or a different currency
› whether you are in someone’s employment or are self-employed
The bank also considers the expected duration of your stay in the Netherlands, as well as your reasons for wanting to buy a house in the Netherlands.
In some cases, if the bank is unable to sufficiently assess your income you will not be eligible for a regular bank mortgage loan. In these cases, the alternative can be a mortgage loan that is provided by private investors instead of a bank.
For example, a British expat wants to buy an apartment in Amsterdam for the total sum of 600.000 euros. He is self-employed and has been running his own company in England for the past 10 years.
However, because he has no track record of filing tax returns in the Netherlands, and has earned an income in mainly British pounds sterling, he is required to first accumulate at least three years of financial track records with the Dutch tax authority in order for banks to be able to properly assess his income.
Until then, the British citizen will not be able to get a bank mortgage loan in the Netherlands.
| Purchase price of apartment | € 600.000 |
|---|---|
| Valuation of apartment | € 610.000 |
| Mortgage loan | € 420.000* |
| Personal funds | € 180.000 |
| Duration | 3 years |
| Interest | 6,5% / year |
| Security |
* loan-to-value rate of around 69%
** same as with a bank
The private investors put their capital in a specially created foundation, which then supplies a mortgage with as its security the first mortgage lien to the collateral (same as with a bank).
The interest is paid in advance each year, and the mortgage has to be paid back by the end of its duration.
In recent years there has been a strong increase in the demand for this type of loan. They give people the opportunity to buy a house which can be a very attractive option considering the high rental prices these days.
These financing schemes are also very interesting for private investors, because they offer a relatively high interest rate as well as assurances (first mortgage lien as well as a favourable loan-to-value ratio).
A great resource for further reading on this topic is mortgagebonds.nl.
For more information, please contact Finsens by filling out the form below.