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Buy to live then buy-to-let: the new Dutch way

What happens if you buy a house and want to leave the country, or outgrow your city apartment but still want to keep it as an investment? This is one subject that Henk Jansen, founder of Expat Mortgages, knows a lot about.

“We get a lot of questions from people who are buying a second house because they are moving, for example, from an apartment in the city to a house in the suburbs and keep their original house as an investment because they can rent it out,” he says. “We also see people moving out of the country who would like to keep their current house, sometimes as an investment or because it’s nice to have a house in the Netherlands for the future and perhaps the kids will want to come back and study or they will get a job opportunity here in future.”

But Expat Mortgages has a warning. “Whenever you want to rent out your property, you always need permission from your bank – always,” says Jansen. “Every mortgage deed in the Netherlands says you can’t rent out your property without prior permission. In the past, banks didn’t really mind as long as you kept paying your mortgage. But that’s ancient history. Now, because of the new Basel regulation that says banks need to know what is in their portfolio, they have to be sure that if they say it’s an owner-occupied house and mortgage, that it is owner occupied.”

At the same time, though, there has been a development in buy-to-let mortgages in the Netherlands for owners who live elsewhere and want to rent out. These mortgages may have an interest rate that is 1% or 1.2% higher, and you may not be able to borrow as much: 75% or 80% of the value of the house, rather than 100% if you are buying to live in a place. The “value” may also be judged slightly lower than the market value if a place has a sitting tenant.

In the past, says Jansen, banks have not focused so much on people who may not be living in their property but are still paying the mortgage. This has changed, and the situation around the coronavirus has highlighted one major problem: if you have already moved abroad, you are no longer eligible to get any kind of Dutch mortgage at all.

“We see more and more cases where banks are chasing people who are paying their mortgages, who aren’t in arrears but who are eventually forced to either remortgage or sell the property,” he warns.

“We have learned from the last few months that people are already abroad, have rented out their property…and when you are abroad there is no possibility to remortgage any more. To get a mortgage in the Netherlands, you have to be registered in the Netherlands.”

There are, however, two banks Expat Mortgages works with which offer owner-occupied mortgages with huge flexibility, so if you leave the country tomorrow, you can switch and still keep the house and mortgage providing you have a steady job and a good rental contract. (If you’re planning to quit that job, arrange the mortgage situation first!)

The point is to think about these things right at the start, when you are applying for a mortgage. Does the bank you are looking at have a buy-to-let option and what would it cost to switch? What would it cost to buy yourself out of that mortgage if you needed to change?

One exception might be if you have a set assignment abroad, for example, two years in the UK as part of a permanent contract. Then, it’s possible to get temporary permission from your current bank, and the rental contract needs to meet certain criteria such as containing a “diplomat clause” which means you have the right to remove a renter.

Although there are no hard figures, Expat Mortgages estimates that tens of thousands of people in the Netherlands are renting out a property without proper permission. But Jansen advises people to take a long-sighted view right at the start. “Investigate your options, do your homework up front, even change your current mortgage,” he says. “Sometimes a penalty is applicable or the rate will be higher, but at least you are doing it the official way.”

”Because if you don’t, the bank can call in the mortgage, force you to sell the property, it will be worth way less when it’s rented, and the renter has rental protection. You can get into real trouble even if you’re paying the mortgage!”

The point is to prepare your mortgage, as well as your move and your new job, if you want to keep your property and avoid the potential ultimate nightmare of foreclosure. Talk to your mortgage adviser before you start planning a move abroad, or to the country: one plus point is that rates are currently incredibly low, between 2% and 3%, even for a house you are renting out.

“They used to call renting without permission ‘the Dutch way,’’ adds Jansen. “The Dutch way has died!” Long live the buy-to-let mortgage!

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