Mortgage advice for starters: all you need and want to know

Mortgage Advice for First-Time Buyers: Everything You Need to Know

Looking for the best mortgage as a first-time buyer? We know that in the current housing market, it seems increasingly difficult to find both a property and a suitable mortgage. Remember though, with the right preparation, you can absolutely do it.

At Mortgage Spotters, we are here to tell you everything you need to know about taking your first step onto the Dutch property ladder.

What is a First-Time Buyer Mortgage?

A ‘starter’ mortgage is simply the Dutch term used for mortgages for first-time buyers. The conditions surrounding these mortgages don’t actually differ from ordinary mortgages, because you can never borrow more than your income permits. It is predominantly just an appealing term; you are simply taking out a standard mortgage.

However, as a first-time buyer, you do have some specific options available to you:

•Parents as guarantors: You can choose a mortgage where your parents serve as guarantors, though this is only possible to a limited extent.
•Extended repayment terms: You can choose a mortgage that you pay off over 40 years, but keep in mind this will ultimately cost more money.

•National Mortgage Guarantee (NHG): You can make smart utilization of mortgage interest rates by taking out an NHG.
•Starter loans: You might be able to apply for a starter loan if your municipality offers it, which you can check on the SvN website.

Would you like to discuss these options with one of our mortgage advisors?

How Much Can You Borrow for Your First Home?

Whether you are a first-time buyer or looking to refinance, a lender will always take 5 key factors into account:

1. Your assessed income such as your gross monthly salary, holiday allowance, and any end-of-year bonuses.

2. The mortgage interest rate.

3. Property value of your dream home. You cannot borrow more than 100% of the market value of the property. Will you be investing in energy-saving measures? If so, you can then borrow 106% of the market value, subject to certain conditions.

4. Financial obligations such as a student loan or partner alimony obligations.

5. Your housing quote. This is the percentage of your gross assessed income that you can allocate towards paying off your mortgage.

You can read an explanation of these factors in the article: How much mortgage can I qualify for?

Expat Tax Benefits & Self-Employment

Tax-Exempt Income: Do you work for an international organization and are you exempt from Dutch income tax? We can still help! To determine your maximum loan, we "gross up" your net earnings to a gross salary equivalent using the correct conversion factors.

Self-Employed: If you are self-employed and have earned at least one year’s income through your business, this income can also partially be incorporated into your application.

Ready to calculate your exact borrowing capacity? > With the help of our calculation tool, you can easily calculate your maximum mortgage.

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How long to fix the interest rate for?

The decision of whether or not to fix the interest rate, and for how long is perhaps one of the most difficult decisions when financing your home. You can opt for a fixed-rate period or variable interest. By fixing the mortgage interest rate, you are assured of stable monthly payments during an agreed period. With a variable interest rate, you are not protected against interest rate increases. You can however benefit from any future decreases in interest rates.

To summarize: this is not an overnight decision. The following 4 questions will help you to figure it out:

1. Can I sustain a potential increase in charges, and do I want to?

At the end of your fixed interest rate period, the interest rate may have become a lot higher. Think about whether you can manage that increase in charges.

2. How long do I expect to live in my first home?

Maybe you’ll pay off the mortgage within 5 years, and won’t take the interest with you to the next property. In that case, it’s a shame to pay a higher interest rate for a longer fixed-rate period.

3. Am I going to borrow the maximum amount?

Do you want to borrow as much as possible based on your income? If so, take into account the key interest rate set by the AFM (Authority for the Financial Markets). This is the interest rate that lenders must utilize to calculate the maximum borrowing capacity. Our consultants can help you with this.

4. Will I be paying off a lot extra?

Are you opting for a fixed-rate period, and paying off your mortgage in 10 years (with, for example, donations or a bonus)? If so, it doesn’t make sense to fix the interest rate for 20 years.

Choosing Your Mortgage Structure

For new mortgages, there are 2 structures that allow you to deduct mortgage interest from your income tax: a linear and an annuity repayment structure.

Linear Mortgage: You will pay off more of the sum borrowed initially.
Annuity Mortgage: You pay less in the beginning compared to a linear mortgage. Usually, first-time buyers prefer annuity repayments because of the lower monthly costs in the first few years.

3 Options if You Have Trouble Getting a Mortgage

1. Apply for a starter loan

A starter loan can offer just that little bit extra to allow you to still be able to buy your first home. The loan bridges the difference between the maximum market value of the property and the amount of your maximum first mortgage. Good to know: not every municipality offers a starter loan. If you’re wondering whether your (future) municipality is a participant, you can find out on the SVn website. Good to know: you can only take out a starter loan in combination with a mortgage that has an NHG (National Mortgage Guarantee).

2. Opt for the National Mortgage Guarantee (NHG)

Taking out a mortgage with an NHG is not just useful for limiting financial risks. It will also provide you with a lower mortgage interest rate – and therefore lower monthly repayments.

3. Receive a donation

Have your parents or grandparents got some savings lying around? A donation is from parent to child is currently up to € 33,129 tax-free, if you meet the conditions of the tax authorities. Because you can only finance 100% of the property value since 2018, your own capital can be crucial.

Worried About Your Contract or Student Debt?

Need a mortgage but don’t have a permanent contract, are a doctoral candidate, or have a high student loan debt? Don’t be discouraged; often it might seem you don't stand a chance, but there are options for all situations.

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