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

How does a starter mortgage work?

A ‘starter’ mortgage is the Dutch term used for mortgages for first-time buyers. You might have already guessed that though. Nevertheless, it’s a strange word to use, as the conditions surrounding a starter mortgage don’t differ from ordinary mortgages, because basically, you can never borrow more than your income will permit. The name ‘starter mortgage’ is predominantly just an appealing term to use; you’re simply taking out a mortgage. These further options are available to you however as a starter:

• Choosing a mortgage where your parents can serve as guarantors. Good to know: this option is possible to a limited extent.
• Choosing a mortgage that you will pay off in 40 years, such as those offered by ASR. Note: this will ultimately cost more money.
• Smart utilisation of mortgage interest rates, for example, by taking out a National Mortgage Guarantee (NHG).
• Opting for an interest-only mortgage or an annuity mortgage. In a nutshell: you pay less in the beginning than with a linear mortgage, because you are not paying off or paying off less of the sum borrowed.
• Applying for a starter loan, if that’s an option in your municipality. You can check this on the SvN website.

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

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Applying for a mortgage as a starter: how much can you borrow?

With the help of our calculation tool, you can easily calculate your maximum mortgage. Whether you’re looking for a mortgage as a first-time buyer/starter, or are someone looking to refinance – in both cases a lender will take 5 factors into account for mortgage applications:

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?

If you’re self-employed

Are you self-employed and have you earned at least one year’s income through self-employment? If so, this self-employment income can also (partially) be incorporated. Our specialized advisors can tell you all about this.

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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:

• 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.
• 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.
• 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.
• 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.

Read more about fixing the interest rate.

Mortgage structures for starters

For new mortgages, there are 2 structures that allow you to deduct mortgage interest from income tax: a linear and annuity repayment structure. The difference in a nutshell? With a linear mortgage, you’ll pay off more initially, and conversely, less with an annuity mortgage.

It is difficult to estimate which mortgage structure is ultimately cheaper. Usually, people who buy a home for the first time have a preference for annuity repayments, because of the lower monthly repayment costs in the first few years.

Read more about the difference between a linear and annuity repayment structure.

3 options if you have trouble getting a mortgage

• Find out if you are entitled to 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).
• 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.
• Receive a donation
  Have your parents or grandparents got some savings lying around? A donation is currently up to € 31,813 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.

Mortgage starter without a permanent employee contract, as a doctoral candidate or with a student loan debt

Need a mortgage, but don’t have a permanent contract, or, are you a doctoral candidate? Or, have you got a high student loan debt? Often, it might seem that you don’t stand a chance. The good news is that there are options for all situations. Don’t be discouraged, but discover:

• How to get a mortgage without a permanent employment contract
• How to get a mortgage as a doctoral candidate or as a trainee doctor
• What your chances are of getting a mortgage if you have a high student loan debt

Are you curious about your possibilities as a starter? Schedule a phone appointment, and we’d be happy to help you.

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