Buy-to-let mortgage: what are the options?
What are the options if you are moving and want to keep your old house to rent out? Or if you’re going to rent out a newly purchased home? We often get these questions from our clients. We explain what you can do.
On this page
Converting a mortgage to a rental mortgage
If you want to rent out your home, you must ask the mortgage lender for permission. You usually won’t get that permission. This is because mortgages for houses you live in yourself are different from mortgages for houses you rent out. These are rental mortgages – also called investment mortgages or buy-to-let mortgages. A rental mortgage often has a higher interest rate and stricter requirements for maximum financing.
What to watch out for if you want to rent out your current home
There must be surplus value to ensure that you can transfer the home to a rental mortgage. This is because you can generally finance a maximum of 70-80% of the market value in a rented state. You may also face a penalty for instantly paying off the current mortgage. In the video below, advisor Carlo Goedhart will explain what else you should pay attention to if you want to rent out your current house.
Lower borrowing capacity due to the additional borrowing requirement (bijleenregeling)
You may also have to deal with the additional borrowing requirement (in Dutch bijleenregeling). Suppose you have a surplus value on your current home. However, you are not selling your current home because you want to rent it out. Then, you refrain from investing that surplus value in your next home. This voids your right to mortgage interest deduction on the portion equal to this excess value. This also means that your borrowing capacity for the new house becomes lower.
Calculation example additional loan scheme
Suppose the surplus value of your old home is € 100,000. The mortgage on your new home is € 400,000. You can still deduct mortgage interest on € 300,000, but not on € 100,000.
Buying a second home to rent out
Are you thinking of renting out a second home? For example, because you want to invest your savings better and build equity for the future. Or are your children moving out, and you want to help them with a home? You can help them find a suitable home with a second home rental mortgage.
On the rest of this page, we tell you more about:
- Market values and appraisal
- How much you can borrow
- Difference between private and business
- Repayment methods
- Box 3 taxes
- Affordable Housing Act
Market value and appraisal
As with a regular mortgage, you need an appraisal report to determine what the market value is. In this case, it is the market value in the rented state. Often the market value in let condition is between 70% and 100% of the purchase price. The appraiser determines this value and will mainly look at how quickly and at what rental price letting is possible.
It’s good to know that every mortgage lender has its own requirements regarding who is allowed to make an appraisal. So first, discuss with us with whom you would like to take out your mortgage and then choose an appraiser.
How much can you borrow with a rental mortgage, and how much money you put in yourself?
Most lenders allow you to borrow 70% to 80% of the market value in a let condition. Suppose the appraisal is low—for example, 70% of the purchase price. You can then borrow about 80% of that amount. That comes down to 56% of the purchase price. So you must pay the remaining 44% with your own money, plus 10.4% transfer tax and other additional costs such as notary fees.
Maximum loan: difference between private and business
There is a difference between private and business investment in housing. As a private individual, for example, you fall under the supervision of the AFM, and the lender, as with a typical mortgage, looks mainly at personal income. Rental income is not supposed to become your primary income. To get an impression of how much you can borrow, you can use tools such as Woonfonds (Dutch) or Dynamic Credit as a private individual.
Rent flow, which is the total amount of all incoming rent, is especially important with a business rental mortgage. A business investment mortgage is designed for professional real estate investors. Not all lenders offer both private and business rental mortgages. Contact us for more information.
Repayment forms
Nearly all lenders allow you to borrow 50% of the market value on an interest-only basis. Anything above that must be repaid. This can be done on an annuity or linear basis. Do you want to finance several houses in the future? It makes sense to keep your monthly costs as low as possible because lenders take these monthly costs into account in the test for the next mortgage. By choosing an interest-only mortgage, you do just that. In general, you can repay 10% of the principal amount penalty-free.
Tax box 3
Find out how it affects your assets on the website of the Belastingdienst. In some instances, it can be beneficial for professionals to place the property to be rented out in box 2 (i.e., in a private limited company, a BV). Discuss this with your tax professional.
Affordable Housing Act
You can read how much rent you can charge on the government website (Dutch). If you want to rent out a house, you cannot always determine how much rent you can ask. Your home is a regulated rental if it does not obtain enough points according to the housing assessment system. This also affects the market value in a let condition. The less rent you can ask, the lower this value. The appraiser will usually perform a point calculation and include this in the appraisal report.
Contact us
Are you wondering which mortgage lenders offer buy-to-let mortgages for your situation? Or would you like to know your options for renting out your own or newly purchased home? Schedule a no-obligation appointment, and we’ll help you quickly.