Buy-to-let webinar questions

If you have purchased a property to live in and have a mortgage. You then need to leave The Netherlands for 1 to 2 years. Can you rent the property out without changing the mortgage, or do you need to change it to a buy-to-let mortgage while renting it out and then convert it back when you return?

If your current employer sends you abroad for a pre-determined period (1-3 years, depending on the bank), you can request your mortgage bank permission to rent out the property for that term. In any other situation, you would have to refinance the mortgage to an investment one. For more information, read our blog: renting your home without a permission.

How do you get past the new laws in cities like Amsterdam and Utrecht requiring that the buyer lives in residence for five years before renting?

There is no way around the applicable laws. You can adjust your parameters of your future investment. Either you change location to an area where there are no/more flexible restrictions, or you increase your budget for the area you are originally interested in (if financially possible).

News has stated that government wants to stop renting out apartments for less than 500k. Is this applicable, and does this 500k refer to the WOZ or market value, as these can be very different?

You need to meet purchase protection requirements based on the WOZ value. Check WOZ values here: Purchase protection law

What I understood is that not all banks allow you to convert the mortgage interest to an investment one and to rent out your house, do you have a list of the banks allowing you this?

Not all Dutch banks offer buy-to-let mortgages, and not all work directly with clients. Top buy-to-let lenders are NIBC, Nationale Nederlanden, or Dynamic Credit. All banks have different terms, conditions and requirements. Contact us for more information on your best mortgage options.

Will the mortgage provider accept the conversation to an investment loan?

Yes, banks allow you to refinance. Depending on the specific situation, the bank might charge a penalty when breaking the contract during your interest-fixed period. Feel free to contact us to learn more about refinancing and if the penalty applies to you.

Do you lose tax deductions if you refinance your residency to let rent?

Yes. There is no tax benefit on buy-to-let mortgages.

If I buy a newly built property directly from the builder and then change the mortgage to buy-to-let, will there be any transfer tax?

No, you need not pay transfer tax when refinancing a mortgage.

Is it true that no property under 400k cannot be rented?

This depends on the municipality you buy the property in. For more information, check the property protection act per municipality: Purchase protection law

How much is the downpayment (in percentage) for the different mortgage types?

There is no percentage of downpayment as the majority of the costs are fixed (apart from the transfer tax and in some cases the real estate agent). For a residential mortgage, check the calculator on our website:https://mistermortgage.nl/calculate-closing-fees-netherlands/. An estimate for a buy-to-let property ca. 43%This also depends on your personal financial situation.

When can you refinance your house after purchase? Is there a minimum waiting period? Can we take out equity from the house with refinancing?

Banks do not have a waiting time to refinance your mortgage. It depends on the investment mortgage bank, but yes there are options to take out equity from the house in the refinancing.

To get the mortgage from the bank, is it mandatory to have the consent and signature/partnership of a spouse who lives in another country and has no contribution to the buyer?

It all depends on if your parentship is registered. Contact us for more information.

Recently, there was an article that govt. box 3 increased the rental yield to 6%, and does not allow to deduct of a mortgage from the value of the house, so you pay quite a high capital tax, can you tell me about it.

When investing in real estate you want your investment to create a profit/yield. Therefore we consider the tax rules and regulations in our calculations, including the capital tax and other costs involved in investing in real estate on the short and long term.

How do the 2024 plans to increase taxes on rental properties impact the current ROI picture you showed?

There are no concrete plans to increase taxes on rental properties specifically at this time. New rulings that have an impact on the calculations will be considered in our calculations.

Keep letting in Utrecht do you need to have the four years, and the value should be above 487.000? do you need both or one of those?

Both these requirements apply. Following you will find the link to the website of the Utrecht purchase protection law. https://www.utrecht.nl/wonen-en-leven/wonen/

Interest rates have gone up a lot and will probably continue. My concern is that refinancing to an investment mortgage at a much higher rate will turn a profitable property into an unprofitable one?

The interest rates have indeed increased from March 2022 till January 2023. Lately, we see a graduate decrease in interest rates to a more balanced rate at this time. We keep a close eye on the interest rates and their progression and include this in our calculations and advise you when you consider investing in Dutch real estate.

If we like a residential property for more than 440K, could you let us know if the transfer tax would be applicable on the differential amount above 440.000 or the entire amount? We are both under 35yrs, and it will be our first home.

If you buy a property of over € 440.000, you pay transfer tax of 2%. If you buy below € 440.000, you are under 35 years old and have not benefitted from the ruling before, you don’t need to pay 2%. For more information, check: Transfer tax changes in the Netherlands

What is the process of taking equity from my existing residential mortgage to secure a buy-to-let mortgage?

We start the process by determining the equity you have in your current residential property. This is typically calculated by deducting your outstanding mortgage balance from the current market value of your property.

The next step is to contact an appraiser to look at your home value. This step is important when you aim to refinance a residential mortgage to a buy-to-let mortgage. In the Netherlands, some banks offer loans for both residential and investment homes.

Depending on your bank's borrowing conditions, we help you to switch mortgage lenders if required. We compare things such as how much you have to pay in interest, the terms of the loan, and any extra costs to find the best choice.

The last step is to apply for an investment mortgage and wait for the mortgage to be approved.

What is the procedure for purchasing a rental property, especially if I already have a primary residential mortgage, and how can I start a buy-to-let mortgage?

The initial step involves a broad assessment of your financial situation.

It's important to note that buy-to-let mortgages work differently than residential mortgages. While income is a key determinant for eligibility in residential mortgages, buy-to-let mortgages encompass a different set of criteria. Lenders also focus on the rental income and how you will sustain two mortgages.

After that, you need to meet the requirements which are:

Contribute 30% contribution (savings) toward the property, drawn from personal savings or equity derived from an established property.
Be registered as a resident in the Netherlands, actively residing and engaged in professional activities within the country.
Pay transfer tax of 10.4% and various closing fees, encompassing expenses for a real estate agent, valuation report, notary services, translation services, and mortgage brokerage fees.

If you meet the requirements and have sufficient savings, our mortgage advisors secure your buy-to-let mortgage.

Do I qualify for a buy-to-let mortgage?

Income and affordability: Lenders assess your income and financial stability to ensure you can afford the mortgage payments.
Rental income assessment: Dutch lenders consider the (potential) rental income from the property to determine your eligibility.
Loan-to-Value (LTV) ratio: The maximum loan-to-value for a buy-to-let mortgage is between 70% and 90%; you must be able to put in 10% to 30% of your savings.
Property type and condition: your property must meet Dutch property rental conditions.

What are buy-to-let investment mortgage interest rates?

Buy-to-let mortgage interest rates are typically higher ranging from 0.75% to 1.25% higher than those for residential properties. The interest rates differ per mortgage lender in the Netherlands. Between 8-10, mortgage lenders offer buy-to-let products in the Netherlands.

What is LTV (Loan-To-Value) for buy-to-let mortgages?

For buy-to-let mortgages in the Netherlands, the loan-to-value ratio is set at 70% to 90%, requiring a contribution of 10% to 30% from your end.

Can I buy a second home to rent it out?

Yes, you can buy a second home in the Netherlands to rent it out. However, you must be aware of certain regulations, taxes, and requirements when investing in buy-to-let property. Let Mister Mortgage guide you through the process.

What are buy-to-let mortgage terms and conditions?

Investment mortgage terms and conditions vary per mortgage lender. However, the most common conditions are:
1. Higher interest rates apply to investment mortgages.
2. Suitable for long-term rent, no short-term rentals, holiday homes, or Airbnb.
3. It's prohibited for owners of investment properties to reside in the property as primary residents.

How long can a mortgage application take for buy-to-let mortgages?

The duration of a mortgage application process for buy-to-let mortgages can vary based on factors such as the lender's procedures, financial situation, and property details. You can expect mortgage approval in 10 - 15 business days if the process is smooth.

What are the differences in borrowing capacity between buy-to-let and buying as a residence?

A buy-to-let mortgage is designed for rental purposes, and residing in the property is not permitted. On the other hand, a residential mortgage is intended solely for residential use, and renting it out is not allowed.

Depending on the lender, the maximum Loan-to-Value (LTV) ratio for buy-to-let properties is capped at 70% to 90%. This means you need to provide a larger down payment than residential.
The maximum Loan-to-Value (LTV) ratio for residential mortgages is 100%.

What are the tax differences between owner-occupied homes and investment homes?

One significant distinction lies in the tax treatment of interest payments on mortgages. Residential mortgage holders can benefit from tax deductions on interest payments, providing potential monthly or yearly tax benefits. However, there is no tax benefit on the paid interest on buy-to-let mortgages. Capital taxes apply to investment properties. There are no capital taxes that apply to owner-occupied properties.

Can I switch my current mortgage to a buy-to-let mortgage while using a foreign salary?

You can switch your current mortgage to a buy-to-let mortgage using a foreign salary. Still, there are several factors to take into account. Lenders here may have different criteria and requirements for assessing foreign income when considering a buy-to-let mortgage.

We ask you to provide a few documents to start the mortgage application related to your foreign salary, including proof of income, tax returns, and employment contracts. Lenders will evaluate the stability and reliability of your income source to ensure your ability to meet mortgage payments.

Besides, your debt-to-income ratio and affordability will be closely scrutinized to determine the amount you can borrow. The Loan-to-Value (LTV) ratio for a buy-to-let mortgage may also vary compared to a residential mortgage, which could influence the necessary down payment.

What are the options for financing a second home in a possible new development?

Purchasing a newly constructed apartment as an investment property offers several advantages, including:

Save on 10.4% transfer property transfer tax.
Lower maintenance costs and energy bills.
New builds are often more popular among potential tenants.
The property's value increases as the nearby area develops further.
Non-regulated rent: if your property falls into the private sector category, it's less regulated regarding the maximum rent limit and a rent increase.

Under what circumstances can I legally seek the bank's authorization to rent my property for up to 24 months, especially if I need to reside abroad?

You can ask the lender for permission to rent your property:

If the employer relocates you abroad for a fixed term (up to two years/ 24 months).
When planning to move but unable to sell due to a lack of buyers. To prevent your home from being empty for a longer time, you rent it out.

If you want to move for longer than 24 months, consider refinancing your residential mortgage to buy to let.

What are the rules for renting a property in case of relocation?

The rules for relocation and mortgage apply:

Obtain permission from a mortgage lender to rent out the property.
Relocation/moving homes must be for a fixed term, at most two years.

What to considerations:

Ensure compliance with mortgage agreement terms.
Notify the mortgage lender about the rental arrangement.
Comply with relevant local rental laws and regulations.
Maintain the property in good condition during the rental period.

What is the process for refinancing my current residential mortgage into a buy-to-Let mortgage to enable me to rent out my apartment? Moving together or abroad, but I don't want to sell my property.

The first step involves contacting our mortgage advisors if you'd like to switch from residential to buy-to-let mortgages.

Our mortgage specialist reviews the terms and conditions of your current residential mortgage. Upon purchasing your property some time ago, you entered into a mortgage agreement with your existing lender. Transitioning to a different mortgage provider involves terminating this arrangement. While there might be a potential fee, often referred to as a penalty, for ending the contract before its fixed term concludes, this is not always applicable.

The prepayment penalty depends on a few factors:

The fixed term of your rate at your current lender
The mortgage rate.
The difference between your interest rate and the current interest rates.
Mortgage lender terms.

The next step is to assess the financial viability. One of the requirements for buy-to-let mortgages is that your rental income to cover mortgage payments is sufficient.

In addition, you need to arrange a valuation report. Lenders often have specific criteria for valuing properties for buy-to-let mortgages.

The last step is to collect all documents and apply for the buy-to-let mortgage. Refinancing to keep to let requires going through the mortgage application again, including paying closing fees and visiting the notary.

What are the legal and tax implications of becoming a landlord in the Netherlands?

Homeowners with a residential mortgage are subject to taxation in Box 1, whereas property investments are taxed under Box 3. Notably, the Netherlands does not impose a capital gains tax. Consequently, rental income remains untaxed if the property falls within Box 3.

Important to note: buy-to-let mortgage interest rates do not come with tax benefits.

What are the best cities or areas in the Netherlands for buy-to-let investments?

The Netherlands' best cities or areas for buy-to-let investments can vary based on rental demand, property prices, economic growth, and local amenities. Some cities often considered attractive for buy-to-let investments include Amsterdam, Rotterdam, Utrecht, The Hague, and Eindhoven. It also depends on your investment strategy. Smaller cities usually tend to have a higher risk when it comes to occupancy, but the return on your investment is also higher.

In 2022, Dutch cities implemented a new law to safeguard homes for first-time home buyers by curbing investor activity in major cities. You can check purchase protection regulations for investment mortgages here.

How does the rent point system work in the Netherlands?

The government employs a point-based system for assessing the eligibility to rent a property. This system varies by location and encompasses factors like:

1. Property dimensions.
2. WOZ (property valuation) value.
3. Energy efficiency rating.

Furthermore, including luxury features can contribute extra points to the property's score.

Properties exceeding a score of 149 points fall into the unregulated category, consequently having no constraints on tenant selection or rent pricing for landlords. However, specific property types might still impose limitations on the number of occupants. For instance, certain municipalities mandate a special permit when accommodating more than two households in a property, commonly in cases of property sharing.

What fees must you consider for maintaining a rental property in the Netherlands?

If you use a property management company, you'll need to budget for their fees, which typically range from 5% to 10% of the monthly rent. These fees cover tenant communication, maintenance coordination, and rent collection.
Regular maintenance and occasional repairs are necessary to keep the property in good condition. This can include plumbing, electrical work, painting, and general upkeep. The costs will depend on the age and state of the property.
Landlord insurance is essential to cover potential damage to the property, liability, and loss of rental income. The cost varies based on the coverage and location.
If your property remains unoccupied, you must cover ongoing costs such as property tax, insurance, and utilities.

How do I calculate the return on investment (ROI) for a buy-to-let property in the Netherlands?

Calculating the return on investment (ROI) for a buy-to-let property in the Netherlands involves assessing rental income and expenses. Here's a basic formula to help you calculate ROI:
ROI = (Net Annual Rental Income / Total Investment Cost) × 100.

For example: Purchase price: € 450.000Required funds: € 184.500Return on investment: 3.66 %.

What are the potential risks and challenges of investing in buy-to-let properties in the Netherlands?

Potential vacancy risk: If you need help securing tenants, your property might remain unoccupied, leading to a lack of rental income to offset mortgage payments.
Assuming tenant-related risk: Embracing the possibility of tenants causing property damage or being delinquent in rent payment is part of the risk profile.
Maintenance and repair expenses: As a property owner, you are responsible for financing maintenance and repairs, which can incur substantial costs.
Interest rate risk: An escalation in interest rates could elevate mortgage expenses, potentially challenging your ability to manage financial obligations.
Navigating legal obligations: As a landlord, adhering to diverse laws and regulations is paramount, encompassing health and safety standards and equitable housing practices. Non-compliance may lead to legal repercussions.
Market volatility: Market shifts could lead to declining property values, potentially leaving you with a property worth less than your outstanding mortgage amount.

Is refinancing our mortgage to take advantage of lower interest rates worth it? Can I refinance my mortgage for a better rate?

Yes, it is worth it because you can save in the long run.

Let's say you took an annuity mortgage for 30 years with an interest rate of 3.8%; you could refinance to an interest rate of 1.7%. By paying lower mortgage payments, you can save on your mortgage payments. A lower mortgage rate also increases the amount of capital payments.