All about living

Buying your first house

Buying your first house is very exciting. There are different financial affairs about which you must think and about which you will have to decide. We will gladly think along with you, so that you can make the choices that fit your situation and personality. 

First, we will make an overview of what the total investment for buying the home will be. After this, we will determine the means or sources by which we will finance this investment. Think for example of a mortgage, using your own means, a Personal Loan, a family loan or a gift. Of course, combinations of these are possible as well.

 

Maximum mortgage

When determining the maximum mortgage, the lender takes into account:

1. Your income

Your monthly mortgage costs should fit your total income minus possible obligations. In the ´temporary mortgage credit regulation´ you can find the percentage of your income which the government allows to be spent on mortgage costs.

2. Market value of the house

The market value of the house to be bought can be fixed in three ways:

  • The purchase price of the house
  • The purchase or contract price, possibly increased by the interest of construction, interest during the construction, the lump-sum on ground rent, additional work or the connection to a public utility
  • The appraised value, potentially after a refurbishing 

You can maximally loan 100% of the market value when buying a house. If you invest in energy-saving utilities, this maximum loan is 106%. For the time being, there are no plans to further reduce this.

 

Existing loans and/or obligations

A lender will always have the bureau for credit registration (BKR) perform a financial test. He wants to know whether you already have financial obligations and what your payment behavior is like. If you already have a consumer credit, this will have consequences for the maximal mortgage sum you can apply for. Namely, 2% of the credit limit is taken into consideration as a monthly financial cost. Some lenders are willing to test for the lower real costs of your financial obligation.

Do you have a study debt from before 5 July 2015? Then 0.75% of your debt will have to be considered as part of your monthly financial costs.

Study debts from after 1 July 2015 can be paid off during a period of 30 years. These debts count for 0.45% in the calculation of the maximum mortgage sum. 

If you have a private lease contract, 65% of the total lease sum is included as a financial liability. 2% per month of this is taken into account as a financial burden.

If you pay partner alimony, this will have consequences for the maximum mortgage sum you can take out. During the period in which you pay partner alimony, this will be deducted from your test income.

 

Mortgage interest tax relief and mortgage types

Your current mortgage debt is relevant for calculating the duration of the mortgage interest tax relief and for calculating which mortgage types are allowed.

If you have taken out a mortgage before 1 January 2001, then the 30-year term for the loan with that sum started on 1 January 2001. In case of a new loan, a new 30-year term applies each time.

With the new mortgage regulations as applying from 1 January 2013, you might qualify for a transitional arrangement. If this is the case, you can continue with your current mortgage type. For a potential extra loan, the rules as established on 1 January 2013 apply. In that case, you can choose between two mortgage types: an annuity based mortgage or a linear mortgage.

 

National Mortgage Guarantee (NHG)

Under certain conditions, you can finance the home with the National Mortgage Guarantee scheme (NHG). The foundation 'Waarborgfonds Eigen Woning' (Homeownership Guarantee Institution) will warrant. A National Mortgage Guarantee mortgage offers both you and the lender extra security. This will result in a more favourable interest rate than funding without the National Mortgage Guarantee.

 

Accidental death insurance

When buying a first home it is of importance that you cover the risk of demise well. The financial consequences of your decease could have a large impact on your partner and your children. Of course, you would like to leave them behind well taken care of.

To cover the risk of decease, you can take out accidental death insurance. Some mortgage providers demand you to cover this, usually when financing exceeds 80% of the market value. In the case of financing based on the National Mortgage Guarantee no accidental death insurance is required.

 

Living cost insurance

Unemployment or professional disability can have large consequences for your income. Of course you would like to be able to keep on living in your house. This is why it is important to map these risks well and - if necessary - cover them by means of a living cost insurance.

 

(New) Construction deposit loan

If you partly finance a refurbishing yourself, the lender will place the needed sum in a so-called 'construction deposit'. The bills you will have to pay or those that you have paid in advance yourself can be claimed from this construction deposit. You will receive interest over the sum in the construction deposit.

 

For newly-built houses, the lender will also provide a construction deposit, but in this case for the total investment. From this construction deposit both the purchase of the land and the construction costs will be financed. The last mentioned will of course be financed in phases as the construction advances.

Besides this, there are possibilities to finance potential double costs (loss of interest) during the construction.

 

Higher mortgage inscription

When taking out a mortgage, it will be inscribed in the so-called mortgage register at the Cadastral Agency. 

If you can get a higher mortgage than you need, you can choose for a so-called heightened inscription of the mortgage. The sum in the register will be inscribed higher than the mortgage amount you take out in reality. The advantage of this is that when you, for example, want to finance a refurbishing after a couple of years, you can increase the loan from the lender up to the amount of inscription, without having to go to the notary again. You should consider that the lender will look at your financial situation again, if you ask to increase the loan privately. You can never lend more than what is possible, your income and the value of the home considered.