When buying a house in the Netherlands, several things affect whether you get a mortgage, including the 30% ruling and whether you are on a permanent or temporary contract.
Arranging a mortgage is always a complicated process, even more so in a country other than your homeland. For our next Expat Information Evening we invited a mortgage broker to tell us more about the whole process. In this interview we asked Corné Leenaars from Smartfee a few questions to shed some light on how different is the mortgage hunt in the Netherlands.
What should expats know about the mortgage process in the Netherlands?
The procedure is a little bit different to other countries. After viewing and getting your offer accepted, you have 4-6 weeks to arrange your mortgage. The role of the advisor is to get an offer from the bank. If you fail to arrange a mortgage, you need to document two rejections from banks for the seller, otherwise there is a penalty involved.
Expats have a strange status for the banks as they often receive the 30% ruling or are on temporary contracts. There are a lot of small details that could make obtaining a mortgage difficult. As advisors our role is to make all of this clear to the client. Secondly, in the span over a few weeks we have to arrange all the documents for the bank. The decision whether you get a mortgage or not is made only after all documentation is filed and nothing is missing.
Besides the expats who relocate to the Netherlands we have also Dutch clients who are returning here after working abroad. For them getting a mortgage might be a bit more difficult. They have to explain that they are really coming back to the Netherlands permanently even though it will take a couple of months. The bank might think that they want to stay put overseas and plan to buy a property only to rent it out which is something the banks don’t want.
How does 30% ruling affect applying for a Dutch mortgage?
Holders of the 30% ruling can get a bit higher mortgage as the income increases. There are some expectations that the duration of the 30% ruling will go down in the next few years so it is something expats should definitely consider. Depending on how long have you worked here and how long is the mortgage for, a mortgage advisor can make a calculation with the income that will be lower and find a mortgage that is suitable for your future income.
How much mortgage can you generally get based on your salary?
It is 4,5 – 5 times your annual income, depending on how high is the salary and the mortgage amount. It also depends on loan to value (LTV) and whether it’s more than 100%. Sometimes you can’t find a mortgage that would cover more than 80% of the value and you need to use your own savings.
Is life insurance compulsory when applying for a mortgage in the Netherlands?
It is not an obligation but it could be needed for your personal reasons. It used to be the case that if you had a mortgage higher than 80% of the value you had to have a small life insurance. It is still advisable though and something I always recommend to my clients even if the bank doesn’t require it. The cost can be quite low and you can still have a pretty good life insurance. And as a financial advisor I can of course help the clients choose the best insurance on the market.
Once the seller accepts your bid, you have four to six weeks to arrange a mortgage.
What are some of the most important things to keep in mind when buying a house with a mortgage?
The most important thing is not to buy without the finance clause. The pressure on the market is so high that some real estate agents may offer you houses only if the contract excludes the financing clause. But if you can’t get the financing after all you will have to pay 10% of the price which can be a lot of money.
There are two different periods to be aware of once the seller accepts your offer. The first period (cooling period) is three working days when you can change your mind and stop the process without any reason. Then follows a period of four to six weeks to arrange your financing. Normally this is a standard procedure but in the current housing market the sellers can choose cash buyers who don’t need the financing clause.
You might find yourself signing a contract without the financing clause because you think that since you spoke to your bank you might have a guaranteed mortgage. Unfortunately, it can still fall through so it’s a very risky thing to do and I always advise against that.
Why should expats hire a mortgage advisor instead of going to their bank and asking for a mortgage directly?
The added value is that a mortgage advisor can get offers from all the banks and choose the best one for the client. You save time by not searching all the banks’ proposals but you can also save money – I can offer clients the same mortgage as a bank but with better interest rates.
What should you look for in a mortgage advisor?
Experience, creativity and what is something extra that they offer. In my case I have exclusive contracts with German banks. A good mortgage advisor should also work fast and be always reachable. For example I have a Dutch client who lives in Singapore but works in Auckland so I need to work across several time zones. It doesn’t matter where you are currently located, I’m still reachable.