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.

Renovate your house with your mortgage

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Informed bidding on a house

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 2023) is: €808.06.

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.

Buying a house in the Netherlands

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.

What about taxes and costs?

Owning a second home is seen as capital in The Netherlands. Based on the vacant value ratio (leegwaarderatio) of the property, the fictive return is calculated (6.17% in 2023). You need to pay tax over this fictive return (32% in 2023).
When having a property with a WOZ-value of 250.000,- and annual rental income of 12.500,-, your capital is €237.500. The fictive return over this capital is 14.654,-. The tax you need to pay will be 4.690,-. You do not have to pay tax over the rental income you receive.

Purchasing a second home for rental can therefore be an attractive alternative to your savings, which are currently barely profitable due to the low-interest rates at banks. Under all circumstances, keep in mind that you have a financial buffer for unforeseen expenses. With an investment like this, your money transforms into your second house and can only be retrieved again when the second property is sold. Based on the actual market values, you will gain a profit or will suffer a loss on your investment.

Keep in mind that there will also be operational costs when owning a rental property. Major repairs and major maintenance are at the expense of the lessor, such as exterior painting or replacing pipes. It is therefore wise to set aside part of the rental income for this. Often 15% of the rental price is recommended.