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Mortgages for Expats in The Netherlands

Author: Jim Newham
Submitted: April 2016

Dutch lenders had a ‘firm but fair’ approach to lending even before the credit crunch. The market was closely monitored, and blatantly imprudent practices such as lending to borrowers deemed ‘subprime’ (read: unsuitable) were not even entertained. These strict policies help to ensure that the rates of default and foreclosure were lower than those in most other Western countries.

This means that finding a mortgage from a Dutch lender may take some time and shopping around between lenders. Loans for first-time buyers are further restricted, and some banks require you to be an EU citizen before they will lend to you. Others require you to have been resident in the Netherlands for a number of years. However, once you have negotiated these hurdles and have a mortgage agreement, you are highly likely to have a good deal.

There are many types of mortgage product in Holland, though those that are deemed insecure are restricted. Repayment mortgages, in which you repay both the capital and the interest, are freely available and divided into two categories. With a ‘linear’ mortgage (lineaire hypotheek), the borrower pays a fixed sum every month until the entire loan is repaid, like a standard repayment mortgage in other countries. With an annuïteit (‘annuity’) type of mortgage, a fixed amount of capital is payed plus an amount of interest that fluctuates according to the interest rate of the Nederlandsche Bank (the Dutch central bank.)

In addition, both fixed and variable rate varieties of both the above two types of repayment mortgage are available. With a fixed rate mortgage, the fixed period may be for up to ten years. Interest-only mortgages are only permitted if you would have paid off at least half of the loan principal by the full term. Combination mortgages are also available from some lenders.

 

Finding a Lender

It is a good idea to look for lenders and arrange a mortgage in principle before you start looking for property. If you get a quote from a lender, this will be valid for three months. Some of the largest banks in Holland are:

However, their slice of the lending market is falling. Newer lenders include Dynamic Credit and Venn Hypotheken (site in Dutch only.) If you have no luck with Dutch lenders, there are other avenues you could explore. These include Argenta (Belgian – site only available in Dutch or French) BNP Paribas and the Bank of Scotland (despite this being a Scottish bank, the website is only available in Dutch!)

Many lenders are prepared to arrange mortgages for non-nationals. In fact, some lenders even offer mortgage contracts in English.  To help you find a good deal from a credible lender, you can ask your estate agent. Alternatively, you might like to hire the services of a bilingual mortgage broker (such as Finsens), as these are not tied to specific lenders. The broker will charge a percentage of the loan amount as a fee.

 

Eligibility

Generally, lenders will expect you to have a passport, have lived in Holland for at least six months, and be permanently employed. If you are self-employed, on low income, or not an EU citizen, it will be much harder to obtain financial backing from a Dutch lender.

Further eligibility criteria are linked to your ability to pay and include the debt-to-income ratio. In the Netherlands, this is quite generous, with the average accepted by lenders at 27%. You are also required to provide a valuation report, which is an independent assessment of the current value of the property.

Terms

So long as you pass the strict entrance criteria, however, things become a lot easier with Dutch mortgages, and the terms they offer are generous and reasonable. As a general guideline, you can borrow up to five times your salary in a mortgage. Technically, the maximum loan-to-value (LTV) ratio is 102% of the property’s purchase price (in 2016; this maximum is scheduled to fall by 1% until 2018). In reality it is difficult to obtain an LTV of more than 85%, though this is still a very good percentage. The repayment period is generally 20 or 30 years.

If you are a high earner and a permanent resident or EU citizen, you may be eligible to apply for the National Mortgage Guarantee scheme. This lowers mortgage interest rates and provides banks with compensation for missed repayments in the event of default.

 

Application

To apply for a Dutch mortgager, you will need a statement from your employer, or the leader of the institution you are attending (e.g. university), proof of income, and an independent valuation of the property.

The Netherlands is unusually generous in that the state actually refunds some of the interest payments you make when repaying your mortgage. This only applies to repayment mortgages and the property must be your main residence. In addition, you must be paying tax in the Netherlands. The maximum rate of refund is 50.5%, though it is decreasing by 0.5% a year for higher earners.

Typical fees are €300-€400 for the mandatory valuation and up to €1,000 lender’s administration fee. If you use a mortgage broker or adviser, they will charge around €1,000 as well.