Do you plan to get started on the property ladder by buying a house in the Netherlands but are worried about whether or not you can? Here are the answers to some of the questions you may have.
If you live in the Netherlands and have a job and a residency permit, you can buy a house. It is as simple as that.
Of course, it is much easier to get a mortgage if you do have a permanent job, but there are ways the self-employed and people on shorter contracts can take out a mortgage as well. A mortgage advisor can help you cut through the red tape.
If you have a job, you will need to provide an employer’s statement – werkgeversverklaring - which outlines the terms of your employment contract. You will also need to show salary slips - showing your gross and net salary and proof of any additional assets you may have, such as an inheritance from Auntie May.
In theory, you don’t need to consult a mortgage advisor but don’t forget buying a house in a foreign country can be challenging, particularly if you don’t speak Dutch. If you are pretty clued up about your financials, online service myDutchMortgage.online is perfect for first time buyers and guides you through the process in six simple steps – in English.
You can get a mortgage for up to 100% of the value of the property you want to buy, so you will need some savings to pay for the fixed costs if you plan to borrow the maximum amount. And of course, the more savings you have, the more you can spend on your dream home.
Normally you need to reserve around 5% of the cost of the house to pay for all the other items associated with buying a house. One good thing - if you are under the age of 35 and a first time buyer, you will not have to pay transfer tax – overdrachtsbelasting - on a property costing up to €440,000 from next January. Here’s a full list of the potential costs and whether or not they are tax deductible.
As a rule of thumb, you can currently borrow 4.5 times your gross annual income, including holiday pay and regular bonuses.
However, this figure is not set in stone and may well change in 2023 now interest rates are rising, because banks are worried people may be trying to borrow more than they can afford. The family spending institute Nibud, which advises the government on these things, has not yet published its recommendations but experts widely expect a cut.
Different rules apply if you are self employed so speak to a financial advisor.
You can also do a reverse calculation. Add up how much you realistically need a month to pay for food, fun, holidays and to save for emergencies. What is left over from your salary is what you can afford to spend on a mortgage.
With current interest rates (edging above 4%, 10 years fixed) for a mortgage of €400,000 you will need to be able to make payments of roughly €2,000 a month or €1,500 once mortgage tax relief has been taken into account. Be aware, that tax relief depends on your taxable income and the fiscal value of the property (WOZ).
If the property is your main residence, then you can probably claim tax relief on your interest payments. In 2023, the maximum against which you can deduct the mortgage interest is 37.05% and the maximum period you can claim for is 30 years.
If you live in a leasehold property, you can also deduct the cost of ‘renting’ the land on which your property has been built (erfpacht) from tax as well.