Buying a house in Holland 5

Mortgage criteria continued

Continuing the theme of my previous article, I repeat that it is vital that you are able to show a mortgage lender your GROSS salary not your net salary.

ALL institutions’ software uses gross salary to calculate the maximum mortgage they are prepared to advance And, as yet, we have not found one that is flexible enough to “gross up” a net amount.

Embassy employees (even those in administrative grades and even those who have been here a long time) have a double problem as have employees of institutions such as the International Court.

You are – generally paid a net salary because you pay no tax anywhere. Therefore your net salary will be seen as your gross salary and the mortgage you can raise will be restricted accordingly.

Furthermore you are accredited through the Ministry of Foreign Affairs and, as such, you do not have a residency permit of any kind. While we should still be able to raise a mortgage for you it is unlikely to be more than 100% of the foreclosure value.

But – as I have said in a previous article – you should ALWAYS apply for alternative offers either directly through some of the institutions I have mentioned or through a broker such as ourselves.

You will incur no charge for the advice – even if – at the end of the day – you do not accept the advice! Nor will you incur any obligation. Therefore, for no cost or obligation you will be reasonably sure that the mortgage you do raise is the best in your circumstances.

Here are the different types of mortgage that may be available to you.

Aflossingvrij.

Interest only. It is unlikely that you will get this kind of mortgage to cover the full cost of buying but you may well use it in combination with one of the other types of mortgage.

Annuiteit.

Effectively all interest payable over the term of the mortgage is added to the capital and then the total divided into equal monthly payments. In the first year ‘repayments’ are about 98% interest and 2% capital. These ratios change from year to year so that in your final year it is 98% capital and 2% interest. Fine if you intend to sell up and go within (say) 5 years. But, if you stay longer, your tax position gets worse since you will be (a) paying more tax as your salary increases and (b) getting less relief on a reducing amount of interest!

Leven (or spaar)

Roughly equivalent to a UK endowment mortgage. To be avoided at all costs. Firstly “growth” in the savings plan is the same as the mortgage interest. Thus - with low interest rates – the “premium” to the savings plan must be higher to meet the repayment goal at the end of the term. Secondly these plans have high “up front” costs so, if you sell up and leave in (say) less than 10 years you end up with an endowment policy that is not worth even the premiums you have paid.

Vermogensgroeiplan.

Actually this is the trade name of the plan of one of the institutions that we deal with. Similar to an endowment policy but using a so-called “unit linked” savings plan. Premiums tend to be considerably lower than a “levensplan” but my comments about cost still apply.

Beleggers. (Investment)

Available through most banks and one or two insurance companies. You pay interest only on the mortgage whilst paying into a savings plan linked directly to the investment funds of the bank. For expatriates this is the best type of mortgage by far since there are virtually no costs attached to the savings plan. When you sell, so long as the sale proceeds enough to cover the mortgage, the savings – together with all growth – reverts to you with no cost and no tax to pay.

Peter Gibney is a consultant with Strategies based in Dordrecht. Strategies are a fully licensed insurance broker/financial advisor specialising in the expatriate market. Any questions arising from this series of articles or other none related matters may be directed to Peter on {phone} 078 844 0879 or {fax} 084 751 2944 or {e-mail}

This article has been submitted by Peter Gibney

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