What is a mortgage?
In basic terms, you take out a mortgage from a mortgage lender as a long term loan to make payments on a property.
The mortgage lender has the option of taking possession of the property and selling it on if the mortgage repayments aren’t made. This is so that the lender doesn’t lose money as they would be making it back from the property sale.
Any time you take out a mortgage, the loan is then split into two aspects. One of which is the interest , which is what the lender charges for lending the money. The other is the capital, which is the actual amount of money used to purchase the property.
What is a mortgage broker?
Mortgage brokers are specialist mortgage providers who will look for a suitable mortgage product on a client’s behalf in order to ensure they get the best possible deal.
Fees and success rates vary from one broker to the next.
Expat Mortgages works with a fixed fee, see ‘conditions of service’ (koppeling)
A bank will charge a fee when you would go direct without a broker. When using a broker you don’t pay the bank a fee for getting a mortgage loan with them, you only pay the broker.
What different types of mortgages are there?
There are two main types of mortgages when mortgaging your primary residence;
Annuity repayment scheme
The main characteristic of an annuity mortgage is that the yearly total of capital repayment and interest payments remains the same as long as you’ve fixed the interest on the loan. Although the total remains the same, the ratio between interest and repayment will changes over the years.
Linear or Straight Line repayment scheme
The most important characteristic of this mortgage is that the loan is repaid yearly in equal instalments (i.e. linear). As a result of these repayments, the amount of interest payable decreases every year. Since the interest expenditure decreases steadily, this mortgage is best suited for lenders who cannot fully benefit from the tax relief on the interest payments and/or want to repay the principal as fast as possible.
How much can I borrow?
The actual amount you’re eligible to borrow will be determined by the value of the property you wish to purchase (Loan to Value) and by how much money you make per year gross (Loan to Income). Other variables like leasehold could have an impact as well.
The majority of mortgage lenders will offer a loan of up to 101% of the property’s value (figure 2017). Next year (2018) this amount comes down to 100% of the purchase price and hence you will need to pay for all costs related yourself.
There is a general rule of thumb that you can borrow around 4.2 up to 5.5 times the amount you earn annually. The actual figures depend on gross income and interest paid on the loan
All mortgage providers will use credit scoring methods. They will check the BKR (Buro of Credit registration) to see if you have loans outstanding and more importantly, if you have never defaulted on a loan.
If you’ve lived in Germany, Austria, Belgium or Italy, they will also do a credit