The transfer tax reduction (valid from June 15, 2011 till July 1, 2012) from 6% to 2% was a pleasant surprise for prospective homeowners.
This temporary measure is expected to give the Dutch housing market a boost. For example, buying a property that costs 250.000 euros will save you 10.000 euros.
Moreover, those who bought a property recently but the transfer has not taken place yet can use the money to either reduce their mortgage or to make additional improvements (renovation).
However, there are other significant changes too.
New mortgage rules
According to the new "code of conduct" (as per August 1), all new mortgages are limited to 106% of the purchase price - the buyers’ costs can still be financed and it is possible to buy a property without any down payment.
Nevertheless, it is not possible to clear any outstanding debts (such as credit cards) with the new mortgage.
Moreover, banks will not lend more than 104% of the increase in value due to renovations. The following example clearly illustrates this effect:
› Property purchase price: 250.000 euros
› Buyer’s costs (6%): 15.000 euros
› Maximum mortgage: 265.000 euros
So far, so good; no cash down payment needed. But with another 20.000 euros for renovation, one will require 285.000 (265.000 + 20.000) euros in total.
Maximum finance for renovation is 104% of the increase in value (look above). If the value (valuation report) of the renovated property is 264.000 euros, the maximum mortgage is:
› 250.000 x 106% = 265.000 euros
› 14.000 x 104% = 14.560 euros
› Maximum mortgage: 279.560 (265.000 + 14.560) euros
But since the required amount is 285.000 euros, 5.440 euros (i.e. the difference) must be paid by you!
A word of advice for homeowners
Homeowners who want to sell their property should be aware of the fact that renovated houses will be easier to sell.
Prospective buyers who can choose between a fully renovated house and one that needs to be renovated will not choose the latter in many cases.
Consequently, the new rules and regulations make renovated houses a much more attractive option.