Buying your first home: the 5 most frequently asked questions

Are you going to buy your first home? You will be faced with many things to deal with! It is important to explore your options. Many first-time buyers like to prepare thoroughly so they know exactly what to expect during the financing process. Viisi has therefore listed the 5 most frequently asked questions by first-time buyers.  But first, let’s answer the most important question in the video below. Do I qualify for a mortgage in the Netherlands?

1. From which types of mortgages can I choose?

In order to be able to deduct your mortgage interest for income tax purposes, the law states that the loan must be repaid within 30 years. This repayment must be made at least on an annuity basis. Faster repayments are also allowed. In practice, this means that there are 2 forms of repayment to choose from: annuity and linear.

Usually, customers who buy their first home prefer to repay via annuity, because of the lower monthly payments in the first few years. Of course, we will be happy to provide you with further details on the type of mortgage that suits you best!

2. How long will it take to secure a mortgage?

This is a difficult question to answer. As a rule of thumb, you should allow for 1 to 4 weeks for the whole process, counting from the moment that all documents have been provided and you have your advisory meeting with your Viisi Advisor. If you’re an entrepreneur, the process can take 1 to 2 weeks extra.

There are a number of factors that influence the speed of the mortgage process. It is also partly up to you. The sooner you provide the necessary and correct documents, the earlier they can be sent to the lender. The speed of the assessment process also depends on the lender.

We monitor lenders’ lead times on a weekly basis. In general, we handle 5 different steps in the process of securing a mortgage.

3. How long should I fix my interest rate?

The longer you fix the interest rate, the higher the cost will be for you now. In other words, you buy security. Of course, it would be a waste to pay more if you do not need to. In order to determine how many years you want to fix your interest rate, ask yourself the following questions:

• Can I afford a potential increase in monthly payments?
  After your period of fixed interest rate, the interest rate may be much higher. Ask yourself if you can afford increased costs.
• How long do I expect to live in my first home?
  If you fix the interest rate for 20 years and decide to move after 5 years, you may be paying a higher interest rate than necessary.
• Do I borrow the maximum?
  Do you want to borrow as much as possible based on your income? Do take into account the interest rate that lenders must use to calculate the maximum borrowing capacity.
• Am I going to make extra repayments?
  Do you fix the interest rate for 10 years and pay off your mortgage in 10 years (e.g. with gifts or a work bonus)? Then it does not make sense to fix the interest rate for 20 years.

Read more about fixing interest rates here.

How much can I borrow based on my income?

The Code of Conduct for Mortgage Loans describes how much you can borrow. In practice, your maximum borrowing capacity for your first home will vary little with different lenders. With our calculation tool, you can easily calculate your maximum mortgage and the corresponding monthly costs. It is usually not a good idea to go to the limit of your maximum borrowing capacity.

Your borrowing capacity is determined based on your income for a mortgage application (toetsingsinkomen). This income usually consists of all the fixed components of your income, such as:

• Gross monthly salary
• Holiday pay
• 13th month
• Year-end bonus

Any allowances or bonuses are usually not included in the calculation of your income. Depending on the type of allowance or bonus, there may still be options (depending on the lender). Of course, we have a good understanding of this and are happy to advise you.

Have you earned at least 1 year’s income as an entrepreneur? Then you can also (partially) include this business income too. Our specialized advisers can tell you more about this.

Reduced borrowing capacity

Keep in mind that the following will reduce the maximum borrowing capacity for your first home:

• (Student) loans
• Ground lease (erfpachtcanon)
• Partner alimony
• Overdraft, credit cards, or other credits (if registered with the Credit Registration Office, the BKR)

5. How much can I borrow based on the value of the property?

In addition to a maximum borrowing capacity based on your income, there is also a borrowing limit based on the value of the home. From 2018, you cannot borrow more than 100% of the market value of the property. There is an exception if you invest in energy-saving measures. In that case, you can borrow up to 106% of the market value under certain conditions.

The market value of the property is usually determined as the market value from the appraisal report. In the case of newly built homes, the market value is usually equal to the so-called total cost of construction: the sum of all costs including the land and any extra work.

In total, there are 5 factors that play an important role in the maximum you can borrow.

Need more advice for your first home?

Would you rather talk to one of our advisers? Please make a telephone appointment without obligation. We are happy to help!

Get in contact