“If I have more savings, I can borrow more”
At Viisi, we like to be clear about what’s involved in taking out a mortgage. In this section, we address common misunderstandings and also highlight some unique facts. This way, you’ll know what to expect and can distinguish facts from fiction.
Do you qualify for a mortgage in The Netherlands?
If you are an expat living in the Netherlands and you are considering buying a house, you may be wondering what the possibilities are for a mortgage. Use our ‘Do I qualify for a mortgage?’ tool and find out if you are qualified! No personal information will be asked when completing the tool.
Find out if you are qualifiedFact or fiction: Savings are essential when buying a home, for example, to cover buyer-related costs (more on this below). But do your savings allow you to borrow more for a home? No, that’s fiction—at least for the most part. Personal savings contribute very little to your maximum mortgage amount. This is due to government-set lending standards designed to prevent excessive borrowing. The following factors determine your maximum mortgage:
- Your income
- The value of the property (you can borrow up to 100% of its value)
- The energy label of the property
- The fixed-rate period and the interest rate
- Financial obligations, such as student loans, personal loans, or car lease contracts
Savings are notably absent from this list because they have minimal impact on your borrowing capacity. Therefore, this is fiction.
Why savings don’t count much
Lenders must be confident that you can afford your monthly mortgage payments; income is a reliable indicator. On the other hand, savings offer less assurance, as they can be spent at any time, such as on a large purchase. However, having personal savings can allow you to buy a more expensive home without exceeding the maximum mortgage amount. Also, the more savings you put in, the lower the risk for the bank and this can result in interest rate discounts.
Savings help a little
Does having a healthy savings account contribute nothing to securing a more extensive mortgage? Not immensely, but it helps a little. Lenders are allowed totake income from savgins and investments into account. They can work with an assumed return of 3% on your savings, regardless of whether the money is in a savings account or invested in stocks. This hypothetical 3% return slightly increases your income and, in turn, your borrowing capacity.
Here’s an example:
€100,000 in savings generates about €3,000 extra income (€100,000 x 3%). Based on the rule that you can borrow roughly 4.5 to 5 times your income, this adds about €15,000 in borrowing capacity.
What if you have significant wealth?
With substantial wealth, you can borrow considerably more. For example:
€1 million in liquid assets generates €30,000 in assumed income (3%). This allows you to borrow up to €150,000 more. If you have no other income, you would need €3 million in assets to finance a €450,000 home entirely, or you could simply buy the property outright without a loan!
Personal savings are always needed
Does this mean you should stop saving? No! Personal savings are always necessary when buying a home. As determined in the appraisal report, you can’t borrow more than 100% of the property’s market value. All additional costs must be paid out of pocket, including expenses like mortgage advice fees and notary fees. The amount of savings required depends on whether you’re buying an existing home or a new build. Our handy guide provides a quick overview.
Good to know: Bidding above the asking price: Be cautious if you bid significantly above the asking price. You cannot borrow more than the appraised value; any excess must be paid from your savings. Similarly, if you’re planning renovations, you’ll often need to cover part of the costs of the renovation with personal funds.
Energy-efficient homes: Buying an energy-efficient home may allow you to borrow more. Your maximum loan amount is tied to the property’s registered energy label. The reasoning is that energy-efficient homes have lower utility bills, leaving owners with more income for their mortgages. If you’re planning to make your home more sustainable, you may also be able to borrow up to 106% of the property’s value to finance these upgrades.
Do: Your maximum mortgage is determined by your income and any debts. If you have a credit card or a phone on an instalment plan, consider whether you should pay off these debts to qualify for the mortgage you need.
Don’t: Only pay off debts if you still have enough savings to cover the buyer-related costs. Repaid debts, such as student loans, often cannot be re-borrowed. Postpone paying off debts until after you you have received the keys from your new home.