How-to buy an house in Netherlands

After 3 years, and taking advantage of being forced to leave the appartment I was living in, I took the decision to make a step ahead and buy an house in Amsterdam.

Now I want to describe how is possible to buy an house in Holland and explain why:
- it’s more difficult to be ripped off
- it’s better not to use your savings
- it’s actually like rent from the bank

Buy vs Rent

Renting prices, since I arrived here in 2006, went up of something like +30% in 3 years, and I can assure that they where not cheap before either
The rental market is split between a social system, where there’s a rank-based system to assign houses to a relieved price, and the free market where is normal to pay 1200-1500 euro/month for a decent apartment inside the city.

For people relocating to Netherlands, once realized that this is a place where to stay some years, buy is the best option.
They say that at least 3 years are required not to loose money on the buy/sell procedure, but should take into consideration that NOT buy means pay rent for something like 13-16K euro/year anyway…

House searching

It’s very important to have clear ideas.
Consider that in Holland the banks can load up to 5 times the annual salary: know WHAT we can afford is only one of the important elements to base our research on… city’s neighborhood, number of bedrooms and bathrooms, surface, floor number (ground floors almost always came with some garden) are all things that the sooner you decide less time you’ll loose.

The website of reference for the house search is www.funda.nl
Funda.nl reunites the associations of house agents (makelaar) and lists 90% of the house on the Dutch market.
Spend some time on Funda is a good idea to understand what is on the market, what are the prices and what are the timings… yes, because a good deal in the city is sold in 1 day while appartments on sale since months are indication that something is not good (or is not nice!).

Suggestions: be REALISTIC and QUICK if you don’t want to loose time and opportunities.

Makelaar’s mafia

In Italy we use to have an house agency to whom the owner gave the task to sell.

In Netherlands the system expect an agent of the seller (like Italy) and an agent of the buyer.

This way during all the procedure of searching, negotiation, buy there’s an agent that represent the seller interests and one that represent the owner interests. (at least in theory)

It’s not mandatory to have your own house agent (makelaar), but for who like me has a language bareer, is not familair with the laws, doesn’t want to spend time and wants less risk this should be seen as a sort of insurance to pay…

What a makelaar does?

A makelaar requires “instructions” with details of what we’re looking for at the moment we’re signing the contract (that is exclusive).
From that moment on the makelaar helps the client:

- in the search phase (they get new deals 1-2 days before they’re listed on Funda.nl…..)

- during the house visits (also more than one per house if needed)

- to evaluate the building especially in regards of registry, foundations, checks about apartment and building

- in the negotiation phase, acting on behalf of the client after consultation

- participate on the meetings with the notary for the sale contract and the property change

How-to choose a makelaar?

If someone recommends you one is much better. I entered in the one closer to my place (20 meters).
The contract conditions are more or less standard:

1.5% of the buying price of the house, or an expense refound of ~400euro if you decide to cancel the contract and stop looking for a place. (to avoid people not serious about it)

OK I like this one

Once you find the house you like, the makelaar does more in deep checks in order to verify that everything is OK and provide all the required info: foundations, status of the ground property, owners association…
Valutation done, you can continue with the negotiation.
Nowadays there’s more room for negotiation compared to the past. In my case we lowered around 10% between asked price and final buying price, but don’t take this as a rule because if the asked price is already good can happen that someone will offer even more…

There we go to the notary, already

This is, they say, the only place where first you buy and then you ask the mortgage.

First meeting with the notary is to write the sale contract, that stops any other negotiation, and has around the table the notary, the buyer and both makelaar.
The contract ahs a clause that allows to cancel it if no bank will guarantee you the load… but is always good thing to check with a financial advisor as a first thing to understand if there’s any risk to don’t get the amount we need.
By law, who sell MUST give all the possible information about the property.
If you buy an house and after you discover, for example, that there are toxic materials and the seller was aware of it, the owner will be responbile.

The second meeting with the notary will be after the delivery of the house and once verified that everything is as agreed (the house is still there and nobody damaged it or took something out for example).
In this meeting, where a translator MUST be there by law for all the non-Dutch citizens, the ownership will be officially transferred.

The notary acts as a warranty that everything has been done according to the rules, and can be involved also later if any problem arise… I personally called him because of a delay on the money transfer and he was available to talk and give me advises without sending me any bills (hehehe)

Mortgage hunting
The mortgage, and in general the banks, are working in a very different way compared to Italy… also because the finance business is a pillar of Dutch economy with colossus like ING, Amro, Fortis etc.
Maybe this is the reason why Italian banks are so solid (according to someone) while here they have been bail-out to avoid collapsing…

But we’re trying to buy house so let’s stay focused on finding the best mortgage, right?

First of all the bank can finance up to 125% of the property value.
The property value (execution price, executiewaard) is calculated by a third makelaar, teoretically indipendent, that estimate the value that the house has if the bank needs to see it via auction to a broker.
Usually this is calculated as -10% of the buying price, and is the amount that the bank considers guaranteed with no risk.

125% is calculated over this execution price, and by consequence will be around 110% the buying price.
This allows to have a mortgage that covers the price of the property plus the 10% of associated expenses, in summary:
- 6% is buying tax
- 1.5% for the makelaar
- 1500 euro for the notary (yes, you read well!)
- 300 euro for the execution price calculation (the third makelaar)
- 200 euro for the tranlator (mandatory by law for non Dutch citizens)

So, the first truth is that a down payment is not required to buy an house.

Now, the kind of mortgage is a topic that was difficult to digest and be digested by others…

The most common mortgage type is “interest only”, but what does it mean?
It means that for 30 years (standard time) we pay the interest over the loan, without giving it back to the bank.
So, if you load 100, for 30 years you pay for example the 5.5% of interest over the 100 but at the end, the 100 is still of the bank.

Basically, we’re renting from the bank, but how much will be 100 in 30 years? probably much much much less then your house.

This kind of mortgage is popular also because here in Netherlands there’s a tax relief over the mortgage interest for the house where you reside, so that the government refund the interest in the same percentage as the tax paid…

To clarify: if we’re in the 42% tax bracket, the 42% of interest of the mortgage will be refund.

For example, if a monthly rate is 1400euro gross and is interest only… the tax office will give back ~400 euro.

Clear?

All this will be better explained by a financial advisor. This is not a consultancy really necessary: you can do it yourself if you’ve time and will to go visit banks to find the best solution for you.

There are discussion going on about this financial advisors, because many of them are paid by the banks and not by the clients, and this is not giving warranty that they’re offering the best mortgage rather then the one that gives them more commissions…
I personally choose an advisor with a fixed fee (2750 euro) paid by me (inside the mortgage indeed!) but with no commissions from the bank (by law, the system is transparent now).
He suggested me an interesting mortgage schema and the bank accepted it

There’s still lot to say about the whole procedure, considerations and thoughts…