Your first home
You are a starter if you’ve never bought a house before. Most starters have rented properties or are leaving the parental home and have never had a mortgage before. As a starter you don’t yet have any equity, which means that you’re required to pay most of the purchasing costs yourself. In addition, you probably have no experience of buying a house before, so there’s a lot for you to deal with.
Buying a house is a key event in your life. Most people experience quite a bit of stress with their (first) purchase, so it’s even more important to be well informed. It goes without saying that Harms & Bakx are here for you for such an important event.
Purchasing costs
When buying your first house, you have to take into account a number of different costs. For example, with an existing house you should take the following costs into account:
- Advice and brokerage costs
- Valuation costs
- Notary fees
- NHG costs
- Bank guarantee costs
- Building inspection costs
- Transfer tax (2% on the purchase price). If you’re under 35, you’ll receive a one-off exemption for a purchase under € 400,000, so you won’t pay any transfer tax. If you buy a new-build, you won’t pay transfer tax, but you will have to deal with double charges (repayment and loss of interest during construction), construction interest and/or land interest.
What is the maximum you can borrow?
What your maximum mortgage is depends mainly on the level of your income, but also on what monthly obligations you have. Spousal maintenance, student debts, private lease contracts or other loans, such as a personal loan, revolving credit or device credit (mobile phone), can significantly reduce the maximum mortgage. How much this is depends on the amount of debt or monthly obligations. Our online tool will give you an idea of the maximum you can borrow.
Since 2018 it’s no longer possible to borrow more than the value of your home. The government has gradually reduced the maximum loan in relation to the market value of the home (LTV or loan to value) to 100%. For example, in 2013 you could still borrow 105% and in 2015 103% of the market value. With a home value of € 200,000 you could therefore easily co-finance € 10,000 in costs in 2013. From now on you’ll have to cover this amount yourself.
Repayment methods
Since January 1, 2013, to be eligible for mortgage interest deduction, you can only opt for the linear or annuity repayment method. This means that you must pay off the mortgage in full in a maximum of 30 years in order to be able to deduct the mortgage interest from income tax. Both methods are explained below.
Annuity repayment
The annuity repayment method is characterized by the constant monthly costs. At the start of the term, the majority of this monthly payment is in interest and a small part is attributed to repayments. As the term progresses, an increasing proportion of this fixed monthly amount will be in repayments and less and less in interest. The advantage of an annuity repayment method is that you pay the same (gross) monthly costs every month and you know where you stand. However, whilst your net monthly payment does increase during the term, the tax deductible interest is increasingly reduced due to the repayment. As a result, you get less back from the tax authorities, so you will pay more net.
Linear repayment
With the linear repayment method, you repay the mortgage in equal parts. When the term of the mortgage is 30 years (360 months), you pay off one 360th every month. With a loan of € 200,000, this is € 555.56 per month (excluding interest). Due to the higher repayment at the beginning, the mortgage debt falls faster. As the term progresses, you pay less and less interest and your gross monthly costs become lower. This is seen as one of the main advantages. The disadvantage, however, is that you pay a different amount every month because the interest is calculated on the outstanding debt. With a mortgage of € 200,000 with an interest rate of 2%, you repay € 555.56 plus € 333.33 (gross) interest in the first month. The following month you repay € 555.56 plus € 332.41 (gross) interest. After one year this is still only € 555.56 plus € 323.14.
National Mortgage Guarantee (Nationale hypotheek garantie)
Are you taking out a mortgage with or without the National Mortgage Guarantee (hereinafter NHG)? The NHG has two important advantages, so it can be very beneficial to take out your mortgage with NHG.
1) Help with payment problems
The National Mortgage Guarantee is a guarantee fund that covers the payment of your (residual) debt if you are unfortunately unable to pay it. Think of employment termination, death or divorce. The NHG will pay the debt to the bank and make a payment arrangement with you to prevent you from getting into trouble. From that moment on your debt is no longer with the bank, but with the NHG. When you have done everything you can to keep the debts as low as possible and have tried to avoid a residual debt as much as possible, the NHG may write off part of the debt, or even the entire debt.
2) Lower interest
Because the NHG significantly reduces the risk for the bank, you will be rewarded by the bank. The mortgage interest rate for taking out a mortgage with the NHG is a lot lower than when you take out a mortgage without the NHG.
When do you qualify?
You qualify for the NHG when the purchase price does not exceed the NHG cost limit. The cost limit corresponds to the average house price and is determined every year. In 2022 this has been set at € 350,000. If you choose to renovate your home sustainably, you may borrow up to a maximum of 106% of the value of your home. The condition is that the amount above the market value (maximum € 17,400) is actually spent on energy-saving measures such as insulation, solar panels, heat pump and the like.
NHG costs
Unfortunately, the National Mortgage Guarantee is not free. The premium you pay for taking out the mortgage with the NHG is 0.6% of the loan. With a mortgage of € 200,000, this equates to € 1,200 in additional costs. You will have to cover these costs yourself. In general, this pays for itself, given the lower interest that you have to pay to the bank.
Want to know more?
Do you already have a house in mind or do you want to know more about mortgages for first time buyers? Harms & Bakx is here for you. Schedule your free and non-binding mortgage consultation directly (online) with us so that we can discuss your situation.