Buy-to-let mortgage
You are thinking of buying a second house for rental purposes. In many situations, this is not possible with a standard mortgage. You will need to take out a rental mortgage. We are happy to assist you with explaining and identifying your options.
Down payment is required
When buying a second house to rent out, investing some of your own equity is required. Do you already own a property with considerable excess value? In that case, you might want to take out this surplus and use is as in investment for your second house.
Other equity is required if you do not own a property with sufficient excess value yet.
Buy-to-let mortgage example
When taking out a buy-to-let mortgage, the maximum amount provided by the mortgage provider is based on the value of the property in rented condition. This is usually lower than the market value, because selling the property with a protected tenant is less profitable.
The example:
A property with a market value of €350.000 has a rented condition value of €300.000. Mortgage providers are often willing to provide a maximum mortgage of 70% (up to 90%) of this rented value. This results in a maximum of €210.000.
The total purchasing costs: (Property: €350.000, 10.4% transfer tax: €36.400 and additional costs such as advice, appraisal and notary: €7.000) €385.000.
The total own investment: (€385.000 purchasing costs, minus €270.000 buy-to-let mortgage) €183.400.
This own investment could be partially financed with own savings and/or a second mortgage on your current house.
The Dutch point system
The Dutch government differentiates two types of rental in The Netherlands: Social housing and Private housing (free sector).
The Rent Liberalisation Threshold (Huurliberalisatiegrens) separates the two. Based on a points-based system, the housing quality and therewith the maximum price for renting your house will be determined. In case of social housing, the maximum rent is based on the number of points the house attains. The current threshold and therefore maximum (in 2024) is: €879,66.
In case of private housing, which means the number of points have exceeded the threshold, the sector has been liberalised. There is more freedom when it comes to maximum rent and rental conditions. There is no point system to determine the maximum price. An appraiser will determine a reasonable rent, which might be used for the mortgage application.
What you should take into account
Second mortgage or Rental mortgage
In case of sufficient equity on your own house, it could be an option to start with taking out a second mortgage first. It is often seen that the interest rates for your own house is lower than rates for buy-to-let mortgages.
When a buy-to-let mortgage is necessary, there are two options. Either a buy-to-let mortgage or an investment mortgage.
The buy-to-let mortgage could be taken out at a regular bank, who has special mortgages that allow you to rent out the property. The fact that the house is going to be rented out means for the bank that there is more risk on the loan. That is why rental mortgages often have higher interest rates.
Banks need to comply with Dutch legislation (GHF) and therefore the maximum mortgage is based on both income as property value. The mortgage costs need to fit next to your current housing costs.
The investment mortgage could be taken out at an investment party that mainly looks at the investment itself, rather than sufficient personal income.
A combination of (expected) rental income and property value determine the maximum loan. Your ability as future property investor needs to be proved (financially).
The interest of an investment mortgage is often higher than buy-to-let mortgages.
Frequently asked questions
How much tax do I pay for my rental property
Ownership of a second home is considered as an asset. A notional yield is calculated on the asset value of the property (based on the so-called 'leegwaarderatio', or 'vacancy rate', which is 6.17% in 2023). Tax is then levied on this notional yield (at a rate of 32% in 2023).
To calculate the tax payable, you can follow these steps:
Step 1
Find the WOZ (real estate valuation) value on the notice issued by the municipality. The WOZ value can usually also be found online via the WOZ valuation portal.
Step 2
Calculate the annual rental value by multiplying the monthly rental value at the beginning of the calendar year by 12.
For example, if the monthly rental value at the beginning of the year is €600, then the annual rental value is (12 x €600) = €7,200.
Step 3
Calculate the percentage that reflects the ratio of the annual rental value to the WOZ value by dividing the annual rental value by the WOZ value and then multiplying by 100.
For example, if the WOZ value is €250,000 and the annual rental value is €7,200, then the percentage is (€7,200 / €250,000) x 100 = 2.88%.
Step 4
Find the result from step 3 in the table for the relevant year.
For example, if the percentage falls between 2% and 3%, the vacancy rate is 84% (in 2023).
Step 5
Calculate the value of the rented property by multiplying the WOZ value by the vacancy rate.
For example, if the vacancy rate is 84% and the WOZ value is €250,000, then the value of the rented property is €210,000.
Step 6
A notional yield is then calculated on the value of the rented property (6.17% in 2023). Tax is then levied on this notional yield (at a rate of 32% in 2023).
For a property with a WOZ value of €250,000 and annual rental income of €7,200, the asset value for tax purposes is determined by the Tax Authority to be €210,000. The notional yield is €12,957 (€210,000 x 6.17%). The tax payable is €4,146 (€12,957 x 32%). The rental income received is not subject to tax.
Are rental incomes taxed?
No, the rental incomes you receive are not taxed. However, owning a second home is seen as wealth. You pay taxes on this in box 3. See also: "How much tax do I pay for my rental property".
Is purchasing or maintaining a second home a good investment?
It may seem attractive to buy a second home for rental as an alternative to the limited returns that banks currently offer on savings. However, it is important to emphasize that buying a second home depends on your personal situation and that it is always wise to seek professional advice from our advisors.
In addition, it is essential to remember that having a second home means that your money is tied up in bricks and is only available through sale or mortgage increase. It is therefore crucial to always maintain a financial buffer for unforeseen expenses. Also, consider the possible fluctuations in market prices as this can affect the value of your investment. Again, depending on your personal situation, professional advice is always necessary.
