From renting to buying
The costs of a home
Two types of costs
There are two types of cost involved in buying and owning a home: Purchase costs: one-off costs you pay when you buy your home. Regular expenses and maintenance costs: payments you will make every month (or at some other interval) after you’ve bought your home.
Purchase costs include:
- Purchase-related costs
- Professional fees and charges
- The price you pay for the home itself
- You will be able to deduct some of these costs from your income for tax purposes.
If you want to renovate your new home immediately, these costs will of course have to be added. If you want to borrow more money for this purpose, you should discuss it with our advisor.
Regular expenses and maintenance costs
Once you have bought your home, you will have to pay your mortgage every month. You’ll also need insurance against damage by fire or storm, for example. And you will have to pay property tax to the local authority every year. Then there are monthly bills for gas, water and electricity. Naturally, you want to live comfortably once you’ve moved in. And you want your home to retain its value. That will mean doing regular maintenance. How much you need to allow for maintenance depends on the age of the property and its current state of repair and maintenance. If you are buying a flat or apartment, you may be required to pay a monthly amount towards a collective maintenance scheme.
|Purchase-related costs||Loan-related costs||Home-related costs|
|Property transfer fax||Advice fee Arrangement fee||Renovation and maintenance|
|Civil-law notary’s fee for property transfer deed||Civil-law notary’s fee for mortgage deed||Moving and decorating|
|Bank guarantee commission||Valuation fee||Insurance|
|Estate agent’s fee (1 to 1,5 %)||NHG application fee (where applicable)||Property tax and local authority rates|
|Structural survey fee||Structural survey fee (where applicable)||Utility and service connection charges|
How much you will have to pay
Your monthly mortgage payment depends on:
- How much you borrow
- The repayment method you opt for
- The fixed rate period you choose
- Your insurance.
How much you can borrow depends on your circumstances. Our advisor can give you a figure, which will take into account your income, the value of the home you want to buy, any additional expenses involved and your future outlook. Your chosen method of repaying the loan, also come into play. Fees are payable for mortgage advice and for administration.
National Mortgage Guarantee Scheme
The National Mortgage Guarantee Scheme (NHG) offers secure and affordable home loans. You pay less interest with an NHG mortgage than with other mortgages. The scheme also provides protection under certain circumstances. For example, if – through no fault of your own – you are unable to repay your mortgage and your home is sold for less than what you owe, you will not have to pay back the difference. However, if your mortgage was taken out after 1 January 2013, you may not qualify for tax relief on the interest: only annuity mortgages and linear mortgages qualify. When you take out an NHG mortgage, you pay a fee to buy into the scheme. Admission to the scheme is also subject to certain conditions. There is a limit to how much you can borrow, check www.nhg.nl
Your home and the tax rules
As a homeowner you enjoy a tax advantage. If you use the mortgage loan to purchase, improve or maintain your home, you can deduct certain expenses from your income for tax purposes. The following expenses are deductible: valuation fee, costs for the National Mortgage Guarantee (NHG) and the arrangement fee.
Tax relief for up to 30 years
Mortgage interest is deductible from your income tax for up to thirty years. After that time you can no longer deduct interest, so you will pay more tax.
Keeping your monthly payments as low as possible
You can sort out the tax relief in advance, which means the rebate will be spread over the months of the current tax year. If you opt for this arrangement, you need to apply for a payroll tax reduction notification from the Tax and Customs Administration.
Your home is also a capital asset
That is why you pay tax for owning a home. To determine the value of the property according to the Tax and Customs Administration, the municipality assesses its value under the Valuation of Immovable Property Act (Wet waardering onroerende zaken / WOZ). You must add a percentage of this WOZ value, called the ‘notional rental value for owner-occupiers’, to your income.
On www.belastingdienst.nl you can find further details about the taxes associated with owning a home.
Where does the Civil Law Notary come in?
The property transfer deed
On the day you legally become the owner of your new home, you will visit a civil-law notary. He or she will arrange payment for the home and will prepare the property transfer deed and the mortgage deed. The transfer deed sets out the terms and conditions of the purchase. These may include any movable goods you are acquiring or a declaration that the soil is not contaminated. Before you sign the transfer deed, the notary will investigate whether: the property can indeed be sold by the seller.
• the registration with the Land Registry is in order
• the legal requirements have been fulfilled
• the property is subject to an attachment order
• If creditors have placed an attachment order on the property, the seller may not sell the property without
• the creditor’s permission
The mortgage deed
If you are taking out a mortgage, the notary will discuss the mortgage deed with you. The mortgage deed sets out the terms and conditions of the mortgage. The notary also arranges for your name to be entered in the Land Registry (Kadaster) as the owner of the property. The Land Registry lists all property ownerships, including residential homes. The notary will also update the mortgage register to show that the property is encumbered with a mortgage.
The notary also acts on the seller’s behalf, and checks whether your bank has transferred the purchase amount. The funds are always first transferred to the notary’s account. Once the purchase has gone through and you have been given the key, the notary transfers the amount to the seller.
You may study the documents before signing
The notary will read out the deeds. If you prefer to read through the documents in detail, you should ask the notary for the draft deeds in advance. You will usually receive a discount from the notary if you sign the transfer deed and the mortgage deed at the same time. If you also wish to handle additional matters, such as writing a will, you can usually expect a discount on these as well. You should discuss this with your notary.
Increase the mortgage?
If you are planning a major renovation in the future and want to borrow money for that purpose, you can apply for a higher mortgage than you need to pay for the property. If you do this at the outset, you will not have to visit the notary again to increase the mortgage. The costs you will have to pay for the higher mortgage registration will be lower than the costs of having to visit the notary a second time. Of course whether you can borrow the money depends on your present situation.
Cohabitation agreement and/or will?
Buying a home is a big step, one that you often take together with other steps, such as moving in with your partner. But even if you are buying the home on your own, you will probably want to put your affairs in order. What arrangements do you wish to make with your partner and family? What happens in the event of your death? If you are already visiting the notary to sign the papers for your new home, you might as well sort out these other details. If you are moving in with your partner, a cohabitation agreement is a good idea. The law regulates many aspects relating to married couples, and somewhat fewer for registered partners. As cohabitees have appreciably less protection, you must therefore arrange these main issues yourself. A cohabitation agreement sets down what belongs to each of you individually and both of you jointly. You can make arrangements about personal financial contributions (for instance towards the purchase of your home), or the division of outlays for running the household and maintaining the home. And – perhaps an uncomfortable point – the consequences of splitting up: who will be entitled to the home, for instance?
Drawing up a will
Besides signing a cohabitation agreement, it is also prudent to draw up a will. This enables you to specify, for instance, that your partner is your heir. If you do not legally arrange this and you do not (yet) have any children, then on your death all your assets and your part of the home will automatically pass to your parents and your partner will receive nothing. A will is also useful if you do not have a partner but you do have special wishes.
A home loan
Borrowing for your new home
Most people who buy, build or renovate a home need a loan to do so. A loan you take out for your home is called a mortgage. You pay interest on what you have borrowed, while you usually repay the loan over a period (‘term’) of thirty years. Shorter and longer terms are also available, but mortgage interest is tax deductible for no more than thirty years.
Mortgage interest rates move in line with economic developments. When you take out a mortgage, it is at the rate of interest applicable at that time. You can choose the length of time that the interest rate will apply. That way, you know exactly how much interest you will need to pay each month for the period ahead. The period you choose is called the ‘fixed rate period’. Alternatively, you can opt for a variable or floating rate of interest, which means the interest rate may change each month. If interest rates go down, you’ll be better off with a variable rate mortgage. However, if rates go up, you’ll pay more than if you had fixed the rate. A variable rate also means you will not be sure how much you will be paying each month. If predictability is very important to you, the best option is to agree a fixed interest rate for the entire term of your mortgage.
If you opt for a fixed rate of interest, you can sometimes also opt for an interest rate refixing period. This allows you to decide during the last two years of a fixed-rate period when the new fixed rate should take effect.
Paying back your loan If you borrow money from the bank, you have to pay it back. There are three ways of doing this:
- You repay part of the loan each month. In this case, the outstanding balance decreases gradually until, by the end of the term, you owe nothing
- . During the loan term, you pay only interest. This means that, at the end the term, you still owe the full amount you borrowed. You then pay the money back in one go. You might do this using savings you have built up during the term of the loan, for example. Or you might raise the money by selling the property. You can borrow up to half of the value of your home on an ‘interest-only’ basis.
If you borrow money from a bank, the bank wants to be sure you will repay the loan. In the case of a mortgage, this means you pledge your home to the bank. This will only matter if you are no longer able to meet your mortgage loan commitments – because you lose your job or get divorced, for example. If you get into difficulties, tell us, and we’ll try to work something out with you. We will only sell your home as a last resort. If that happens, the proceeds from the sale will
be used to repay the loan. If the sale brings in less than what you owe, you will have to fund the balance from another source.
What kind of mortgage?
A mortgage is a loan, which you pay back over time. The way in which you do that depends on the type of mortgage. Compare the different types of mortgages available through P&P Assurantie Adviesburo BV, they are independent and work with nearly all the banks in the Netherlands. You can apply for a mortgage through P&P Assurantie Adviesburo BV if you have a valid passport, permanent employment in the Netherlands or a letter of intent, a citizen service number (BSN), have lived in the Netherlands for at least 6 months.
• You only pay the interest on your mortgage each month. This gives you lower monthly payments. You do not pay back any of your loan until the end of the mortgage period. • You may deduct the interest payments from your taxable income. The debt remains the same as you do not pay any of it back. The amount of interest you pay also remains constant. • If you took out an Interest-only Mortgage before 1 January 2013, you may deduct the interest you pay from your income for tax purposes. This means that you retain maximum tax benefits. • If you have taken out an Interest-only Mortgage aftersince 1 January 2013, the mortgage interest you pay on the new Interest-only Mortgage is no longer deductible from your income for tax purposes.
• Your monthly repayments remain the same. At the start your repayments are low and the interest high. Later you repay more while the interest is lower. • Entitled to mortgage interest deduction? Then your monthly repayments will be lower at the start. Later on you will have to pay more each month. • As you will be making repayments each month, you will be assured that the loan will be repaid in full. • You may deduct the mortgage interest from your income for tax purposes.
• The amount to be paid back will decrease steadily as you will be paying back a fixed amount each month. Interest will be paid on the loan. The amount of interest you pay will also decrease steadily. This means that you will be able to save money for other purposes in the future. • With the Linear mortgage you pay back a fixed amount each month. This means that you will pay back your loan in fixed segments. You will be assured that you will have repaid the loan in full by the end of the mortgage period. • You may deduct the mortgage interest from your income for tax purposes.
If you would like to learn more about the available mortgage options, contact us we can setup an appointment for you. The orientation meeting is free of charge and is for the account of us