Mortgage FAQ: Is now the right time to buy a home with increasing interest rates?

When it comes to mortgages, one of the most frequently asked questions is: “Is it the right time to buy as the interest rates have increased?" In this article, Egle Kemezyte from Mister Mortgage goes over the actions which can help you to determine if this is the ideal time for you to become a homeowner in the Netherlands.

Interest rates and house prices can impact your decision to buy a home. However, your personal and financial positions play a more critical role when becoming a homeowner.

Understanding equity: Buy or rent a home

First, you should understand how equity works.

One of the benefits of being a homeowner is that you accumulate wealth when owning a home (in a stable or increasing market). When you rent a home, you pay rent to a landlord with no return on investment. While monthly mortgage repayments gradually increase home equity.

There is no capital gain tax on the profit you make when selling your home in the Netherlands. You can sell your house in the future and consider the equity as your profit.

Keep an eye out: Economic trends

Sometimes, it can be challenging to predict how the economy will behave in some situations. However, keeping up with economic news might help you decide whether to act.

For instance, when the pandemic hit, borrowing rates were at an all-time low, making homeownership more attractive. At the same time, it was unclear what would happen in the market later.

In the summer of 2022, interest rates sharply increased. With the ongoing conflict in Ukraine and the still-recovering economy following the pandemic, it is expected that rates will remain unchanged for now. Also, the ECB ( European Central Bank) increased interest rates to fight inflation in July and has already planned another increase in September.

What does the future hold? According to a recent report by ABN AMRO, it is expected that:

• Short-term: interest rates will go up
• Long-term: interest rates will go down first, then up again

Even though it seems like the significant era of low-interest rates is finished, for the time being, it is good to know that they are still historically low. In addition, interest payments are deducted from taxes in the Netherlands, and the Dutch tax authorities give refunds of tariffs annually or monthly.

Get your affairs in order

It is essential to organise your finances before you start the home-buying process. Before making a big financial step, you must feel comfortable and know your options.

First things first, consider all the fees you need to cover, this could include mortgage closing fees, purchase fees, renovation, credit card debts or lease agreements. Do you have trouble sorting your finances? You should seek the help of an experienced mortgage specialist to help you.

A professional mortgage specialist can help you set up your finances and provide a comprehensive breakdown of your maximum mortgage, required monthly payments, and closing costs.

Purchasing a property might take anywhere from a month to a year. If you are lucky, you might be able to buy a home more quickly. Thorough planning helps you save time and reduce stress.

If you are not in the position to buy and want to postpone it, you can already prepare for the big step:

1. Get a personalised mortgage report
2. Plan a free consultation with a real estate agent
3. Start saving if necessary
4. Start repaying debts / credit cards if necessary
5. Start exploring Funda and the neighbourhood where you want to live

The Mister Mortgage team can help get you a responsible and affordable mortgage, whatever the interest rate. Their experienced mortgage specialists are on hand to help you with everything from applying for a mortgage to planning your financial future. Schedule a call to discover your options with one of the Mister Mortgage specialists.