Currently mortgage interest is still tax deductible and house prices and mortgage rates tend to remain steady.

Mortgages

The first thing to do is to assess how much you can borrow for the mortgage (hypotheek). As a rough guide you can take 5 x your household's yearly salary. Once you know how much you can borrow there are several options available for the type of mortgage.

Repayment mortgage

- lineaire

- annuiteiten

Investment mortgage

- saving (spaar)

- belegging (investment)

Non-repayment mortgage (aflossingsvrij)

Repayment mortgage

There are two types of repayment mortgage, lineaire and annuiteiten.

With the lineare mortgage you pay the same amount off the mortgage every month for the entire mortgage term, but because you are paying money off the mortgage, the amount of interest you pay decreases. With this mortgage you have higher gross monthly payments at the beginning of the term and lower towards the end.

With the annuiteiten mortgage you pay the same amount every month in total, comprised of repayment and interest. In the beginning of the mortgage term the amount comprises mostly of interest and less of repayment, as the term carries on you start to pay more on repayment and less on interest. With this mortgage you have the same gross monthly payments throughout the whole term of the mortgage.

Investment mortgage

There are two basic types of investment mortgage, spaar and belegging.

With the spaar (savings) mortgage you pay only the interest on the mortgage amount and a premium into a saving account. This is more expensive than with the beleggings mortgage, but you have more assurance of paying the mortgage off at the end of the term.

With the belegging (investor) mortgage you pay only the interest on the mortgage amount and a premium into an investment fund (stocks and shares). This is a more risky option than the spaar mortgage. It is also possible to invest savings as a lump sum at the beginning of the term and then you don't pay the premium each month.

Non-repayment mortgage

The other type of mortgage is the non-repayment mortgage, aflossingsvrij.

The aflossingsvrij mortgage is not available over the whole mortgage amount. With this type you pay only the interest on the mortgage amount and have to make your own arrangements to pay the mortgage off at the end of the term. This is useful for people who have investments that they want to capitalise on.

It is possible to combine the above mortgages and have a tailor-made mortgage, the most suitable for you.

Valuation

For the mortgage it is necessary to get the house valued (taxatie). This report gives you information about the state of the house and the mortgage company a valuation. You can borrow 125% of the execution value (executie waarde). This is lower than the perceived actual value and reflects the lowest amount the house would sell for if repossessed.

Additional Costs

Buying a house is not cheap, as a rough guide the additional costs are approximately 10% of the buying price. This includes 6% tax (stamp duty), solicitors fees, valuation fees, house registration costs, estate agent fees, mortgage administration fees. But you can include these costs in your mortgage.

Tax

Interest on your monthly mortgage paid is tax deductible. This is not automatic, you need to fill in a temporary tax return (voorlopige teruggaaf) available from the tax office. The deemed amount is then paid into your bank account in equal monthly installments. If you don't need the monthly installments you can also wait till the end of the year and fill in an income tax return form and you will receive the total refund in one big amount.

For the first year it is also possible to deduct all costs concerning the mortgage and kadaster (house registration). This includes, the mortgage administration fees, valuation fees, house registration costs, part of the solicitors fees. At the start of the following tax year you must then complete a full tax return (providing receipts). The temporary tax return only runs for one tax year - you have to complete a new one each year (usually around beginning of December for first payment in January).