So, what is the best way to tackle this question? It would be to start by asking more questions. Humans are storytelling beings, therefore, each answer to the main question will differ depending on the person. So, let’s begin!
Important aspects to consider
Here are a few important questions to ask yourself before making the decision to take out a mortgage in the Netherlands:
What are your plans for the future?
Start by thinking about your future. Buying a house and taking out a mortgage is a commitment, therefore it is important to take your time. On the other hand, maybe you have been living in the Netherlands for a while already and know that this is the place where you want to settle down.
But maybe you have that little voice in the back of your head that you want to go back to your home country, or move somewhere else (although unlikely😉)? These are all worries that you might come across, and you will be happy to know that there are solutions for your purchased home if you wish to move back abroad later on.
As a rule of thumb, if you live in a Dutch home for over three years, you have already set yourself up in a good position.
Is the house a residential or investment property?
Whether the house is for you and your family is an important factor to know. Why? The housing market for residential properties (where you will live in) is different compared to buy-to-let mortgages (properties bought for investment purposes). This is mostly because of the possible impact of Dutch government regulations. Lenders have to abide by these regulations which further impacts their options when providing you with a residential mortgage or a buy-to-let mortgage.
Long story short, we do believe this is a great time to buy a residential property (please see more below). On the other hand, we are more reluctant when it comes to buying a property for investment purposes.
The upsides to buying a house
There are several advantages to buying a house in the current market. Firstly, interest rates have risen over the past year, and a consequence of that is that the market has cooled down a lot.
Since there is still uncertainty about the housing market in the Netherlands, there is good “momentum” that can help you to get a good deal. This pattern will likely carry on until the market gets used to the fact that these current interest rates are likely here to stay, and then demand for property will rise again.
The downsides to buying a house
As you probably know, interest rates have a positive correlation with monthly repayments. Therefore, higher interest rates equal higher repayments. Another point to keep in mind, with a higher interest rate, banks will allow you to borrow less money.
Insights on mortgage costs
Here is some insider knowledge when it comes to mortgage calculations. As you may already know, your maximum borrowing capacity is based on your total gross annual income. But, what you might not be aware of is that the Dutch government has a substantial influence in determining your borrowing capacity.
Every year, the government decides how much of your income as a percentage can be spent on your mortgage. Taking inflation into account, it wouldn’t be surprising if that percentage drops while other expenses increase. What this means for you is that there is a possibility that there is a reduction in your borrowing capacity in the coming years.
Supply and demand
It is well known that there is a housing shortage in the Netherlands, with the larger cities being impacted the most. This is also one of the driving forces of rising housing prices.
On September 19, 2022, King Willem-Alexander announced that there will be 900,000 new homes built between 2022 and 2030. This is a great initiative to combat the lack of supply plaguing the Netherlands, and hopefully it will provide a more level playing-field for first time home buyers. However, what housing experts see in the market is that it will be a great challenge to achieve this goal - and may even be highly unlikely.
Inflation
You’ve probably noticed the increase in costs when it comes to grocery bills, gas and electricity, (hopefully) payslips, and most considerably, rent. This last one is especially interesting; rent is adjusted yearly depending on inflation. If you own your property, however, this will not be the case. With a mortgage you can fix your interest for an extended period, giving you more certainty over the costs.
Are you still thinking about whether you should buy a home in the Netherlands? Or did this article incite more questions about the process?
Klår Finance are mortgage experts who specialise in assisting expats in the Netherlands. They would love to talk with you and are ready and willing to discuss any ideas or concerns that you may have.