Tips for taking out a mortgage
Those who want to buy their own house will have to take out a mortgage in almost all cases. In fact, a mortgage is simply a loan that is provided to purchase real estate. Such a loan is also referred to as a mortgage loan. When you take out a mortgage, the house you purchase becomes the collateral for the loan. If you can no longer meet your mortgage obligations, the lender (usually a bank) has the right to sell your property in order to be able to (partly) reclaim the borrowed money.
Buy a house? First identify the costs
When you plan to buy a house, it is important to first map the costs. This applies to starters on the housing market as well as to people who already have a house for sale, but are about to move. People sometimes think that the asking price of their new house is the only cost they have to take into account. Unfortunately that is not the case. In order to know exactly how high the mortgage must be and what you may need to finance yourself, you must first make a good calculation.
Are you buying an existing building or a new building?
When taking out a mortgage it makes the difference whether you buy existing construction or new construction. There are, in fact, a number of costs that only apply to existing buildings and that can go down well. For example, for an existing home you have to pay transfer tax. That is currently 2% of the purchase price of the property, which can easily be thousands of euros. You also have to pay appraisal costs. In order to obtain a mortgage, an appraisal report is almost always mandatory in the case of an existing home. These additional costs are borne by the buyer.
What is the value of the home?
To determine how much mortgage you can get, the property you have in mind will first have to be valued. Because the mortgage lender receives the property as collateral, he or she must know for certain that the market value of the property roughly corresponds to the loan amount. Most mortgage lenders hold a percentage of 85% of the market value in the event that your house is forced to be sold. This value influences the amount of the mortgage that you can take out.
The amount of the mortgage is income dependent
The amount of the mortgage that you can take out is, of course, partly income-dependent. Before entering into the contract, the financial institution that provides you the mortgage certainly wants to know that you can meet your monthly obligations. Unless you have a lot of savings, you will have to pay the mortgage on your salary, so you must be able to show how much you earn in an employer’s statement. If you are not employed, but self-employed, you will be asked for your annual figures. If you are about to stop working because of your pension, both your current salary and your future income will be taken into account.
Different mortgage types
There are different types of mortgage, which can in principle be divided into two categories: the annuity mortgage and the linear mortgage. The annuity mortgage is a mortgage in which the costs of repayment and interest are the same each month (provided that the interest rate remains constant) and the mortgage is fully paid off at the end of the term. With a linear mortgage, the repayment is even, but because the interest component is calculated on the outstanding principal, the costs will continue to decrease over time. If interest rates rise, the monthly charges will almost never be higher than you had to pay at the start of your mortgage.
National Mortgage Guarantee (NHG)
The Stichting Waarborgfonds Eigen Woningen has established the National Mortgage Guarantee. The purpose of the National Mortgage Guarantee is to ensure that you do not have to sell your home if circumstances such as unemployment, divorce or death of your partner prevent you from paying the mortgage. The NHG will then help you find a solution. If it is nevertheless necessary to sell your property, the NHG can pay you a possible residual debt under certain conditions.
In some cases it can be attractive to pay off your mortgage more quickly by making additional payments. It is best to have a financial adviser assess whether this is also the case for your personal situation. Because the mortgage interest is tax deductible for the time being, a lower mortgage with a lower interest rate can have a negative impact on your income. Repaying extra with savings, an inheritance or donation therefore seems a wise step, but does not always have to be. Therefore, first inquire about the conditions for additional repayments and discuss them with an adviser.
Transfer your mortgage
The term of most mortgages is thirty years. It is nevertheless possible to prematurely close your mortgage under certain conditions. This can be an option if the interest rate is low and you could therefore save on your monthly expenses. However, what you have to take into account is that re-lending your mortgage is actually canceling the old one and taking out a new one. In both cases there are costs involved. For example, you may be confronted with a fine for early repayment of your old mortgage and you must pay costs for taking out your new mortgage.
Can you take out a mortgage yourself?
To save costs you could take out a mortgage yourself. Yet taking out a mortgage loan is a complicated process that requires you to take many factors into account. Because the term of a mortgage is thirty years, it is very important that you choose the right form and conditions for your current and future situation. So make sure that you let yourself be well informed and do not go ice cream overnight.