Buying a house comes with many complex decisions like choosing one of the mortgage types
The three decisions on a mortgage are:
1. Mortgage types: government-guaranteed mortgage type or a conventional mortgage type
2. Mortgage form: annuity, linear, or interest-only
3. Interest rates: fixed interest rate or floating interest rate
The two main types of mortgages are a government-guaranteed mortgage or a conventional mortgage guaranteed by a banking institution.
The Stichting Waarborgfonds Eigen Woningen (WEW) provides the coverage for NHG. WEW was established in 1993 to realize that buying a home is more affordable. They do this by carrying a shared risk with the banks.
Why should you pick a mortgage with NHG?
Mortgage lenders offer a better interest rate for mortgages that are guaranteed by NHG because of the shared risk. Because mortgage lenders don’t need to include the shared risk in their pricing.
Why shouldn’t you pick a mortgage with NHG?
NHG guaranteed mortgages have a maximum sum of € 265.000 (2018). For newly built houses it’s € 280.900 (2018). It’s hard to find a house in Amsterdam that meets this term of NHG.
Flexibility or a low interest rate. What is your pick?
Banks, lenders, and savings institutions offer and guarantee conventional mortgages.
Why should you pick a conventional mortgage?
Mortgage lenders are more (in)flexible when they don’t need to meet the criteria and terms of NHG. While this will be an advantage in some specific cases, in other cases it can be disadvantageous.
Why shouldn’t you pick a conventional mortgage?
The possibility of borrower default poses a risk for mortgage lenders. Therefore, the risk causes higher interest rates than government-guaranteed mortgages. As a result, banks charge a higher interest rate.
See what you know and where you can improve your mortgage approach. Make an informed decision about the terms of your mortgage.