Month: January 2018

What are the types of mortgages available in the Netherlands?

Posted on by Katerina Triantafillou

From 2018, you can only take out a mortgage that is a maximum of 100% of the value of your house – including 2% overdrachtsbelasting (property transfer tax). This is referred to as ‘Loan to Value’ (LTV).

At first glance, the variety of mortgages on offer from the banks may seem bewildering. However, most of these mortgages come in one of two general categories: capital repayment and interest payment; and only interest-only repayment .

Capital repayment and interest payment

Mortgages which are based upon repayment of both the capital (value of the loan) and interest are tailored by the banks to provide various repayment profiles. In essence, they all expect you to pay both the interest on the original loan and the value of the loan itself within a given time period (term). A typical mortgage term can be up to 30 years, but will depend on your age and circumstances.

One popular type of capital and interest repayment mortgage fixes the amount that you repay each month on your capital loan over the term of the mortgage and is termed a lineaire hypotheek (linear mortgage). Hence, in the beginning, the amount that you pay each month will be high, as you will be paying off a fixed amount of your capital and a relatively high amount of interest (relating to the amount of capital owing). However, the monthly payments will decrease over time as the capital of the loan is paid off and the corresponding interest reduces. The benefit of this type of mortgage is that it can be repaid relatively quickly. However, as the size of the interest repayment reduces with time, you will find that you will not be able to claim as much tax benefit (as the payment of the capital is not tax deductible).
An alternative type of capital and interest repayment mortgage is an annuïteitenhypotheek (annuity mortgage). With this mortgage, the total amount that you pay each month is fixed over the repayment term. The benefit of this type of mortgage is that the repayment remains the same each month and thus makes it easier for you to manage your monthly expenditures. In the beginning, most of the monthly repayment will be just the interest on the loan, whilst later in the mortgage term you will start to pay off a greater proportion of the capital. Tax is only deductible on the interest of the mortgage. Hence, you will find that the proportion of your monthly repayment – on which you can claim a tax relief – will reduce during the given time period.

Remark: currently annuity mortgage and linear mortgage are the only kinds of mortgages that are eligible for hypotheekrenteaftrek (interest tax deduction), whereby the loan is repaid within 30 years.

Interest-only repayment

With an interest-only repayment mortgage, you only pay back the interest on the value of your mortgage each month. The benefit of this mortgage is that the payments you make each month will be lower and thus more affordable. However, as you are not paying off any of the capital (value of the loan), you are not in a position to own your house; that is, unless you are confident that you will have sufficient funds to pay off the original loan as a lump sum at the end of the mortgage term.

It should be noted this kind of mortgage is no longer deductible from your income for tax purposes. Banks are no longer eager to offer this type of mortgage anymore. However, you can take over your old mortgages to your new house and continue having an interest-only or bank savings/investment mortgages or a combination and keep the eligibility of the interest deduction.

There are other types of mortgages based upon payment into an investment fund. The idea is that you only pay off the interest on the loan and at the same time contribute into an investment fund. At the end of your investment term, you should have acquired a sufficiently high return on your investment to (hopefully) be able to pay off the capital of your mortgage.

Other mortgages link repayment of the interest on the loan to paying for an insurance product, such as life insurance, or paying into a savings policy. The idea is essentially the same as above, in that you acquire sufficient funds over the term of the mortgage to pay off the original loan.

Remark: These products are not available anymore within the mortgage advice for starters. Existing mortgages containing these kinds of products may be continued.

How can I decide which mortgage is best for me?

Posted on by Katerina Triantafillou

If you are unsure of which mortgage is best suited for your needs, it is suggested that you seek advice from one of the following:

  • a bank or mortgage lender
  • an independent specialised hypotheek adviseur (mortgage broker)
  • a professional financial advisor

In helping you to determine which mortgage is most appropriate for your circumstances, you need to ask yourself the following questions:

  • How much do I want to borrow?
  • How much can I afford to pay each month?
  • How long do I want to take to pay off the mortgage? (This will be dependent upon a variety of factors such as your age, how long you intend to live in the Netherlands and the security over your future employment)?
  • When, how much and how do I want to redeem my mortgage?
  • Which risks do I want to be insured against?
  • What type of mortgage do I want?
  • How important are the overall interest costs, risks, flexibility and tax benefits to me?

How is the interest on my mortgage calculated?

Posted on by Katerina Triantafillou

The amount of interest you pay on your mortgage is based upon the interest rate agreed with your bank or mortgage lender which is applied to the value of the loan. Most Dutch mortgages are offered for up to a term of 30 years. Within the term, the bank will normally allow you to choose how long you wish to fix the rate of interest on your mortgage. This can typically be anywhere from one to 20 years. Hence, if you think the current interest rate will be reduced in the future, you may elect to fix the rate for only a few years. Conversely, if you think the interest rate will go up in the future, you may wish to fix the rate for a longer period. It should be noted that banks will offer a spread of rates depending on the duration that the rate is fixed. The interest rate quoted will typically rise with the increasing length of time that it is fixed; this is to cover the lender’s risk if the benchmark interest rate (set by the European Central Bank) rises in the future.

At the end of the fixed rate period, you are entitled to agree to a new fixed rate with your lender.

What type of information is required when getting a mortgage?

Posted on by Katerina Triantafillou

The requirements for getting a mortgage will depend on the bank or mortgage provider you choose. Generally, people originating from an EU member state country and who have a permanent employment contract do not experience any difficulties in getting a mortgage.

The bank will want to know about the property that you wish to purchase. They may ask for you to pay for an independent inspection report on the property before they make any decision on whether to grant you a mortgage.

For people from outside the EU, the bank may want to consider the following aspects:

  • The kind of residence permit you have
  • The level of security afforded by your employment contract and what type of job you have
  • Who is your employer? Generally, it is easier to get a mortgage if you work for a well-known, larger company than for a small company
  • How much you currently earn after tax and pension deductions (take-home pay)
  • What other significant expenses you currently have, e.g. paying for a car, any bank loans etc. and your general financial situation
  • The nationality of your partner (is he/she Dutch or not?)

What happens if I find that I can no longer afford to pay my mortgage?

Posted on by Katerina Triantafillou

It should be remembered that your house is considered by the mortgage lender as security against the loan. Therefore, effectively you do not own your house until the mortgage is paid off in full. Should you default on your monthly payments (due to personal circumstances, e.g. getting into debt, becoming unemployed or divorced), the lender has the right to repossess and sell your house to pay off the remaining debt. However, this is very much a last resort for the lender.

The banks will always explore possibilities with you to address your current difficulties, before taking the more drastic action of repossessing and selling your property. If a bank does decide to sell your house and the sale value is less than the remaining mortgage value, you will still be expected to pay off the difference (with interest).

The National Mortgage Guarantee (Nationale Hypotheek Garantie –NHG) is provided by the Homeownership Guarantee Fund (Waarborgfonds Eigen Woningen – WEW). The main aim of the fund is to promote the responsible purchasing of private property. Hence, if you take out a mortgage to buy a house, you may be eligible for the NHG coverage. The NHG is only applicable for mortgages up to a certain limit. A summary in English can be found at www.nhg.nl/english-summary/Information-for-consumers/What-is-nhg. You may have to check the Dutch version in order to find the current maximum value.

If you are forced to sell your property by your mortgage lender and the value of the sale is less than the original mortgage loan, then the NHG may settle your outstanding debt with your mortgage provider.

Can I claim mortgage tax deductions on my mortgage?

Posted on by Katerina Triantafillou

The interest that you pay on your mortgage might be hypotheekrenteaftrek (tax deductible) from your earnings. If you are on a Dutch payroll and are considered a resident taxpayer, meaning you pay taxes in The Netherlands, you are entitled to the same benefits that Dutch citizens have. The mortgage relief or tax deductible has always been a contentious issue in Dutch politics and this tax benefit may become more limited in the future.

For your personal tax situation, it is advisable to look at the Belastingdienst (Tax Authorities) website (in Dutch only) or contact them on the English speaking telephone help line by calling 055 538 5385.

How can I get connected to telephone, Internet and TV?

Posted on by Katerina Triantafillou

In the Netherlands, telephone, Internet and TV are available digitally and/or via cable. Many providers offer bundles of all three services. It is important to bear in mind the length of your stay and your location, as not all providers have a complete country network. Satellite television is also an option, but you need to fix a satellite dish in the right direction and there are regulations covering this

For both landline and mobile telephone, there are several providers offering subscriptions. For mobile phones, you can also choose for a prepaid option instead of a subscription but they are usually more expensive. Top-up cards can be bought at most telephone stores and supermarkets. It is also possible to top up your prepaid credit via the Internet and by phone. Nowadays, if you have a subscription with a mobile company in an EU country you can use internet and phone calls at the usual rates. Calls within the EU have no roaming costs anymore.

It is advisable to compare price, quality and always read the small print. You can compare tariffs and conditions at the following websites:

  • For All-in-1 bundles & Internet+phone subscriptions visit: Breedbandwinkel.nl/expats (in Dutch only)
  • For a comparison of prices of different providers visit: Bellen.com (in Dutch only) or Prijsvergelijken.nl/compare-broadband

For your information 0800 numbers are toll free; 0900 numbers are charged (per call or minute).

Are there any special rules for collecting household waste?

Posted on by Katerina Triantafillou

In many cities households have two separate waste containers: green for waste from vegetables, fruit and garden (groente-, fruit- en tuinafval, GFT) and grey/brown for all remaining waste (restafval). Both containers are emptied once a week or alternating weeks. If your municipality has decided that household waste should be compulsorily separated, you will receive a fine for non-organic waste placed in the green container.

You need to put your waste/bins outside your house at the time set by your municipality. If you don’t, you may be fined.

Glass, paper, plastic and clothing/textiles, medicines and batteries, small electrical appliances and bulbs can be deposited in special containers in your neighbourhood.  Bottles and cans should be returned for cash. Other types of waste (oversized household waste, domestic chemical waste etc.) can be brought to one of the city’s garbage and recycling stations.

If you live in an apartment building with rubbish bins or underground containers, you can throw away your rubbish in these containers anytime. Be aware of any specific rules that may apply to the tenants of the building.

What factors should I take into account before buying a house or apartment?

Posted on by Katerina Triantafillou

A very important factor when buying a property is that you are clearly aware of the property’s legal standing. This means that you need to check whether it is eigen grond (freehold) or erfpacht (leasehold) property. If your potential house is freehold, then you fully own the plot and the house. Leasehold would mean that you only own the house but not the plot (this is the case for apartments as well). This means you will be paying an annual fee for renting the plot. Your real estate agent can provide this information.

Existing houses are usually sold as ‘kosten koper (kk)’. This means that all additional costs such as overdrachtsbelasting (property transfer tax) and notariskosten (notary costs) must be paid by the buyer.

New houses are usually sold as ‘vrij op naam (V.O.N.)’. This means that the purchase price includes BTW (VAT), property transfer tax and notary costs.

Bouwtechnisch onderzoek (construction inspection)

It is strongly advised to ask an expert for a bouwkundig onderzoek (construction inspection). This person will check things such as:

  • crawl space (if accessible) and floors, drainage, ventilation, piping in crawl space
  • state of the facades, roof, chimneys, window frames, gutters, roof, and chimneys
  • determination of the presence of lead pipes and risk carbon monoxide
  • fire safety and asbestos suspected.

The real estate agent who sells the house often recommends someone to do this. However, this person may not be independent. Therefore it is best to ask your own real estate agent for an expert. If you don’t have a real estate agent it may be useful to ask advice from the Vereniging Eigen Huis https://www.eigenhuis.nl/#/ (Dutch only). This is an interest group for home owners

Things to consider when buying a house or apartment

When buying a house or apartment, take the following things into consideration:

  • Research appropriate neighbourhoods considering: housing prices, access to public transportation, green spaces, distance/time to your work, location of schools
  • View properties during the day then again in the evening to notice any potential problems and have a sense of the area
  • Limit your viewings each day
  • Be sure to take photos and jot down notes
  • Ask questions and strike up conversations with the estate agent, the seller and people in the area
  • Take into account your estate agent’s advice
  • Inquire about: who owns the property, how long it has been on the market, how many viewings there have been, how many bids have been made, why it is for sale, and how quickly it needs to be sold
  • If possible, do not get into a bidding war and avoid sealed bid offers

What costs are involved in buying a house or apartment?

Posted on by Katerina Triantafillou

It pays to visit a bank or mortgage broker for free advice before you start considering buying property to get an idea of the total costs involved. In general, about 10% of the purchase price will be needed on top to pay for various taxes and fees:

  • Hypotheekkosten (mortgage fee): around 1%
  • Taxatierapporten (valuation/appraisal costs): if a mortgage is needed. Costs between 300-1,000 euros
  • Makelaarkosten (real estate agent fees): not always involved but if it applies, costs vary between 1-2 percent of the price of the property
  • Notariskosten: the notaris (notary) is needed to register the sale and the mortgage. It is usually between 1,000-3,000 euros

Note that the deposit on the property is 10% of the purchase price, paid six weeks after the purchase agreement has been signed. This may be replaced by a bank guarantee issued by a Dutch bank.

What other costs should I consider before buying a house in Netherlands?

Posted on by Katerina Triantafillou

When you buy a house, you have to pay the overdrachtsbelasting (property transfer tax) which is calculated based on a fixed percentage of the sale price agreed with the seller. No overdrachtsbelasting has to be paid if you get (part of) a house through divorce, marriage or inheritance. Currently (2021) the overdrachtsbelasting (transfer tax) is 2%.