Which mortgage

Which mortgage is best for you depends on many factors.
For expats to choose which mortgage is the best for them, they always have to take in calculation how long they are planning to stay in the Netherlands.

Your wishes, plans in the future, mortgage rates and your tax situation are important in the choice which mortgage to take. The mortgage experts of Expats Amsterdam can help you with choosing the wright mortgage. 

To help you in the choice which mortgage is best for you we will discuss the most important subject.

1) Which mortgage, Type of mortgages

There are many types of mortgages, but if you want to have tax refunds for the interest you pay there are two types of mortgages. There is a linear mortgage and a annuity mortgage. These mortgages are based on regular repayment during the term of the mortgage. With these types of mortgages, the outstanding loan balance decreases each month.

Linear

In a linear mortgage, you repay the initial mortgage loan by a fixed amount every month. On top of this you pay interest, but the interest payments will reduce over time since you are gradually redeeming the initial loan. Since the mortgage amount will actually decrease, so will your interest payments.

A linear mortgage can be useful for people who wish to repay their mortgage as quick as possible. Reasons for this can be that you want to reduce your risk that you will have a debt after leaving th Netherlands. The quicker you pay off , the less risk you will have for a debt after selling your house. Most expats will have the 30% ruling and therefore more money to spend at repaying their mortgage loan. What also can be a reason is that you like to rent out your house in the future. If your mortgage is low compared with the value of the house, the change is bigger that your mortgage lender will give approval of renting the house. Also important if you have to choose which mortgage type you prefer, the linear mortgage is cheaper than the annuity mortgage. This is because you pay less interest during the duration of the mortgage compared with the annuities mortgage.

Annuity mortgage

The defining characteristic of an annuity mortgage is that you pay a lot of interest in the initial years but repay little of the initial capital loan. This reverses towards the end of the mortgage term as you begin to pay off more capital and hence less interest. With the exception of fluctuations in mortgage interest rates, you make fixed monthly payments throughout the mortgage term.

Through redemption, repaying the mortgage, the mortgage debt decreases and the amount of interest you pay decreases over time. However, this means that your net housing costs will increase slightly as only the interest on the loan is tax deductible.

Annuities can be an interesting option if you prefer lower monthly cost in the first years of your mortgage.
This is because you are doing less repayment compared with the linear mortgage.

2) Which mortgage, Fixed mortgage rate

Important in the choice which mortgage is best for you, is how long you will fix the mortgage rate.
How shorter the fixed period is, the lower the mortgage rate is.

Fixed periods can go from 1 month until 30 year. Important in the choice which period is the best of fixing your interest rate is how long you think you will stay here in the Netherlands.

If you are planning to stay for a short period, 1 to 5 years, it is wise to fix your mortgage rate also for a period that is short.
How shorter the fixed mortgage period is, the cheaper the mortgage rate will be.
Having shorter the period of fixing the more risk you will take about changing monthly housing costs.

If you are planning to stay for a longer period in the Netherlands or might thinking about renting out your house after you leave the Netherlands, it can be wise to choose for a longer period of fixing your mortgage rate.
Going for a longer fixed mortgage rate gives you more stability on the monthly costs of your living costs.

You can find all the Dutch mortgage rates for each fixed period here.

3) Which mortgage, National Mortgage Guarantee

National Mortgage Guarantee plays in important role in the choice which mortgage is best for you.
if you take out a mortgage to buy a house, you may be applicable for the National Mortgage Guarantee.

The main condition is that they buy price of the house must not exceed € 231.132. If you have National Mortgage Guarantee you will get a low mortgage rate from mortgage lenders. This can be around 0,7% discount at normal mortgage rates. You get this discount because with National Mortgage Guarantee the mortgage lender has a lower risk that they will have unpayable debts in the future.

Unemployment, incapacity for work, divorce, death of a partner are events which can make it difficult for you to meet your financial mortgage-related obligations and, in the worst case, may even force you to sell your home.
If the proceeds of a forced sale are insufficient to redeem the mortgage, you are left with a residual debt.
Here the National Mortgage Guarantee helps you.  It ensures that this residual debt is settled with your lender.
However, you must have tried to minimize the level of the debt, for example by contacting your lender as soon as you fell behind with payments.
The remaining amount is then waived meaning that you can start again without financial troubles.

You pay once a fee of 1% of your mortgage amount for the National Mortgage Guarantee.
More information on the website of National Mortgage Guarantee.

4) Which mortgage, Repayment of the mortgage

Also important in the choice which mortgage is best for you, is how long you will choose to fully repay the mortgage.
You will get maximum 30 years from a mortgage lender. From the Dutch tax authority you also get 30 years to deduct your mortgage costs.

If you choose for 30 years your monthly cost are at the lowest but you might can choose for a shorter period.
If you go for a shorter period your monthly costs are higher but your mortgage amount decreases.
This has the advantage that your mortgage rate might decline faster.
Also if you sell your house the change of having a debt is much smaller.

Own money
An important issue in the choice which mortgage is best for you, is if you will use own money for the buy
of the house. If you are not applicable for the National Mortgage Guarantee you will pay a higher mortgage rate because the mortgage lender has a higher risk that they will have unpayable debts in the future.
By using own money the risk of the mortgage lender decreases and also the mortgage rate decreases.
Higher risk means increase of interest risk, you can see it in this risk table uses by mortgage providers.

Risk table (average of mortgage providers)

Mortgage / House value National Mortgage Guarantee 60% market value 80% market
value
100% market value 104% market value
Risk Storage 0% 0,2% 0,5% 0,6% 0,7%

 

During the fixed mortgage period your mortgage rate can change if you come in a lower risk class. In the choice which mortgage is best for you it is important that you take a good look at these risk tables so you can choose to use more own money.

5) Which mortgage, Mortgage lenders

There are many mortgage providers to choose from.
If you know which mortgage you want, you or your mortgage advisor can compare the mortgage providers
to see which one is the best for you.

Each mortgage provider has his own mortgage rates, products, rules and conditions on the granting of a mortgage.
Especially for expats, there are many differences between the mortgage providers looking at the rules and conditions.
It is necessary to have a mortgage advisor who know all the mortgage rates, rules and conditions
of each mortgage provider.

Choosing which mortgage is best for you can be pretty hard.
Expats Amsterdam is an expert in helping expats to choose which mortgage is best for them.
Feel free to contact us. The first meeting is always free of charge.