Mortgage advice: buying your next home
Are you ready to buy your next home? Then you will be moving up the housing ladder. Below are the seven most asked questions by people moving up the property ladder.
- What types of mortgage can I choose from?
- Do I have to negotiate the mortgage interest rate?
- Do I have to pay the lender any brokerage fees if I choose to work with Viisi?
- What if I haven’t sold my current home yet?
- How do I deal with equity?
- How much can I borrow on my income?
- How much can I borrow based on the value of the house?
1. What types of mortgage can I choose from?
In order to be able to deduct the mortgage interest, since 2013 you can only choose between an annuity mortgage and a lineair mortgage. Did you have a home-acquisition debt on 31 December 2012, and still do without any major interruptions? In that case, you are still entitled – subject to certain conditions – to a mortgage-interest deduction on other types of mortgage up to a maximum equal to your present loan sum. For example, you can still get interest-only mortgages. For this, it makes no difference who you place your new mortgage loan with.
Are you planning on borrowing more for your new home than your current loan sum? Then new rules apply to the amount you borrow on top of the old mortgage sum. The most popular type of mortgage among our customers is decreasing term repayments, because this gives you more flexibility and lower monthly repayments in the initial few years. Of course we are happy to give you more information on the type of repayment that suits you best!
2. Do I have to negotiate the mortgage interest rate?
Before 2013 it was profitable to negotiate with a lender on the mortgage interest rate when you bought a new home. If you didn’t (well enough), you were likely to pay too much. Since 2013, negotiations are no longer necessary; you have far better consumer protection. Every lender must publish the mortgage rates, and negotiations are no longer permitted. Some lenders may give discounts, for example if you open a current account (with a mandatory salary pay-in). You don’t need to negotiate about this either. It is just an option you can use.
3. Do I have to pay the lender any brokerage fees if I choose to work with Viisi?
No. If you engage Viisi to handle your mortgage, you will only pay us advice and brokerage fees. If you get your mortgage straight from the bank/lender, you will be paying advice and brokerage costs directly to the bank/lender.
Our rates are clearly set out on our website.
Viisi collaborates with virtually all lenders and helps you to choose the best solution for you. Of course, we compare their mortgage rates; you can find up-to-date mortgage rates from most lenders on our website. But there are many other conditions to take into account depending on your personal situation. Do you expect to be repaying more in the future, and are you entitled to a lower mortgage rate if you do? How long do you expect to be living in the property and can you take your mortgage with you when you buy another home? Is there a possibility that you might spend time abroad in the future, and will it in that case be possible to let out the property? Are you considering going into business, and can you then still obtain a new mortgage from your lender? As circumstances can change and we want the best possible mortgage to match your situation both now and in the future, we are always interested in your future plans.
4. What if I haven’t sold my current house yet?
There are different possible reasons to buy first or sell first. Do you want to buy a new home before your current home is sold? Then it is important that you are able to show that you have enough income and/or savings to cover repayments on two mortgages temporarily. Depending on your lender, this may be a period of one to two years.
You must also be able to show that you can absorb any residual debt from the sale of your current home. The value of your current home is usually set out in a statement from your selling agent or a recent valuation report.
If you have little or no savings, it is usually better to wait until you have sold your current home. If you don’t want to wait, one option may be to have a relative sign a statement that they will donate any double charges to you.
5. How do I deal with equity?
Will you have any money left after you have repaid the mortgage when selling your property? The best thing to do is to reinvest this money in your new home. If you don’t, you will lose any entitlement to a mortgage-interest deduction on the amount of the equity. If you buy your next home more than three years after you sold your previous home, this does not apply.
It is not unusual for the transfer of your current home to a new owner to take place after you have already become the owner of your new home. In this case, you do not have equity at your disposal when you buy. The solution is to temporarily borrow extra money for the new home or to take out a bridging mortgage loan.
Learn more about bridging mortgage loans.
If your current home is worth less than your mortgage debt, you will be left with a residual debt when you sell the property. This is called ‘negative equity’.
6. How much can I borrow on my income?
The Code of Conduct for Mortgage Loans describes how much you can borrow. In practice, this means that your maximum borrowing capacity from various lenders will be more or less the same. On our website you can make an indicative calculation of your borrowing capacity and the associated mortgages. It is advisable not to go to the limit of what you can borrow.
Your borrowing capacity is determined based on your qualifying income. Your qualifying income usually consists of the following income components:
- Gross monthly salary
- Holiday pay
- Thirteenth month’s salary
- End-of-year bonus
Any allowances or bonuses are usually excluded from your qualifying income. Depending on the type of allowance/bonus, different lenders may still offer different options. Of course we have a good understanding of these options and we are happy to help you.
Have you been earning income from your own business for at least one year? Then you can let this business income (partially) apply towards your qualifying income. One of our specialist advisers can tell you more about this.
Keep in mind that the following can reduce your maximum borrowing capacity:
- (Student) loans
- Ground leases
- Spousal maintenance
- Overdraft facilities, credit cards, credit facilities (if registered with the Credit Registration Office (BKR))
7. How much can I borrow based on the value of my home?
In addition to the maximum borrowing capacity based on your income, the value of your home also has a maximum borrowing threshold. As of 2018, you cannot borrow more than the market value of the property, subject to the case you invest in energy-saving measures. In that case, you can borrow up to 106% of the market value, subject to conditions.
The maximum borrowing threshold compared to market value of property in 2020 is 100%.
The market value of the property is usually determined as the lower of the purchase price and the market value as stated in an appraisal report. In some cases a recent WOZ (real-estate appraisal) assessment suffices if the WOZ value is much higher than the borrowing amount. For newly built houses, the market value is usually equal to the total cost of construction, which is the sum of all costs including the land and any additional work.
Take a look at our step-by-step plan to see how we can help you get the right financing for your home.