Buying your first home
Buying your first home
How does a starter mortgage work?
A ‘starter’ mortgage is the Dutch term used for mortgages for first-time buyers. You might have already guessed that though. Nevertheless, it’s a strange word to use, as the conditions surrounding a starter mortgage don’t differ from ordinary mortgages, because basically, you can never borrow more than your income will permit. The name ‘starter mortgage’ is predominantly just an appealing term to use; you’re simply taking out a mortgage. These further options are available to you however as a starter:
How long to fix the interest rate for?
The decision of whether or not to fix the interest rate, and for how long is perhaps one of the most difficult decisions when financing your home. You can opt for a fixed-rate period or variable interest. By fixing the mortgage interest rate, you are assured of stable monthly payments during an agreed period. With a variable interest rate, you are not protected against interest rate increases. You can however benefit from any future decreases in interest rates.
To summarize: this is not an overnight decision. The following 4 questions will help you to figure it out:
Can I sustain a potential increase in charges, and do I want to?
At the end of your fixed interest rate period, the interest rate may have become a lot higher. Think about whether you can manage that increase in charges.How long do I expect to live in my first home?
Maybe you’ll pay off the mortgage within 5 years, and won’t take the interest with you to the next property. In that case, it’s a shame to pay a higher interest rate for a longer fixed-rate period.Am I going to borrow the maximum amount?
Do you want to borrow as much as possible based on your income? If so, take into account the key interest rate set by the AFM (Authority for the Financial Markets). This is the interest rate that lenders must utilize to calculate the maximum borrowing capacity. Our consultants can help you with this.Will I be paying off a lot extra?
Are you opting for a fixed-rate period, and paying off your mortgage in 10 years (with, for example, donations or a bonus)? If so, it doesn’t make sense to fix the interest rate for 20 years.Mortgage starter without a permanent employee contract
Need a mortgage, but don’t have a permanent contract, or, are you a doctoral candidate? Or, have you got a high student loan debt? Often, it might seem that you don’t stand a chance. The good news is that there are options for all situations. Don’t be discouraged, but discover:
How much can you borrow?
With the help of our calculation tool, you can easily calculate your maximum mortgage. Whether you’re looking for a mortgage as a first-time buyer/starter, or are someone looking to refinance – in both cases a lender will take 5 factors into account for mortgage applications:
1. Your assessed income such as your gross monthly salary, holiday allowance, and any end-of-year bonuses.
2. The mortgage interest rate.
3. The property value of your dream home. You cannot borrow more than 100% of the market value of the property. Will you be investing in energy-saving measures? If so, you can then borrow 106% of the market value, subject to certain conditions.
4. Financial obligations such as a student loan or partner alimony obligations.
5. Your housing quote. This is the percentage of your gross assessed income that you can allocate toward paying off your mortgage.
Mortgage structures for starters
For new mortgages, there are 2 structures that allow you to deduct mortgage interest from income tax: a linear and annuity repayment structure. The difference in a nutshell? With a linear mortgage, you’ll pay off more initially, and conversely, less with an annuity mortgage.
It is difficult to estimate which mortgage structure is ultimately cheaper. Usually, people who buy a home for the first time have a preference for annuity repayments, because of the lower monthly repayment costs in the first few years.