Maximum mortgage A mortgage institution always runs the risk that you will not meet your obligations when it provides you with a mortgage. To limit the risks, the mortgage institution will carefully assess in advance what the maximum mortgage it will be willing to provide you with. Two ratios are used to determine the maximum mortgage. First of all, the relationship between the mortgage amount and your income is examined. This is also known as the Loan to Income or LTI for short. In addition, the relationship between the mortgage amount and the value of your home is examined. This is also called the Loan to Value (LTV).
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Maximum mortgage on income Since 2007, mortgage lenders have been obliged to use NIBUD housing load standards when calculating the maximum mortgage on income. Since 2013, the Temporary Mortgage Loan Regulation provides by law that these standards must be used by all mortgage providers for all types of mortgages. Mortgage institutions may only deviate from this calculation to a limited extent. For example, there must be a justified reason (eg an unconditional increase in salary within 6 months).
It is of course sensible to calculate for yourself whether the mortgage costs associated with your maximum mortgage fit within your budget. After all, you should also have money left for other expenses.
Income Your income situation is therefore very important in determining the maximum mortgage. Not every form of income is included in the same way. The basic rule is that only the fixed, certain income components are included in the calculation of the maximum mortgage. When the income is uncertain or unstable, it may be that this income is only partially or even not included in the calculations. This can happen, for example, with income from benefits, income from temporary employment or income from business. Below we describe how many mortgage lenders deal with these income sources. However, individual mortgage lenders may have different standards.
Income from temporary employment In connection with income from temporary employment, it is assumed that a letter of intent is available from the employer. This means that the employer officially states in writing that there is an intention to continue the temporary employment contract or to convert it into permanent employment. If there is no letter of intent from the employer, this income will not be included in the calculation of the maximum mortgage, according to the standards of most mortgage institutions.
Income from benefits In connection with income from social security benefits, it is assumed that this is permanent. If this is not the case, according to the standards of most mortgage institutions, this income will not be included in the calculation of the maximum mortgage. Given the uncertain situation with regard to the AOW, WAO / WIA and WW, this can reduce the chances of a mortgage for many benefit recipients.
Income from an independent profession or business In connection with income from an independent profession or business, you should take into account the fact that not all mortgage lenders will include this income. They do not provide mortgages to self-employed persons. However, many mortgage institutions have the rule that they will count income from self-employment or business if income has been received for at least the last 3 consecutive calendar years. The income that is then included by the mortgage institution is the average net profit or the average operating result of the past 3 calendar years up to a maximum of the net profit or the operating result enjoyed in the last calendar year.
Since 2019, it has also been possible as an entrepreneur to obtain a mortgage with a National Mortgage Guarantee if the company has been in existence for less than 3 years. Since then, NHG has been working with the Entrepreneurs' Income Statement. This is an independent analysis of the figures of the company that ultimately rolls out a test income. This test income is included by NHG in the mortgage application as the income of the entrepreneur. More and more banks accept this income statement for mortgages with and without NHG when assessing the mortgage application.
Special monthly charges In addition, it is examined whether there are special monthly charges in the form of personal loans or alimony. These monthly payments can significantly reduce the maximum possible mortgage. We will briefly discuss below how these factors can limit the maximum mortgage.
Alimony When you pay partner alimony, the mortgage institution will often not include your income in full. Usually, the amount you pay in alimony per year is deducted from your income. Any maintenance you pay for your children is not taken into account.
Personal credits The moment you still have personal loans outside the mortgage, this limits the maximum mortgage that can be obtained. It is often assumed by default that you have a 2% payment obligation per month on the debt amount. This amount is deducted from the permitted mortgage costs. If your payment obligation is actually lower, you must demonstrate this on paper. In that case, the actual expenses are usually assumed.
Fixed interest period In connection with the mortgage interest rate, a special rule is almost always used: the maximum mortgage you can get is lower if you opt for a short fixed-rate period. The underlying reason for this is that it can be risky to opt for a short fixed-rate period if you borrow a high amount in relation to your income. In that case, you may pay a low interest rate in the beginning (low monthly costs), but the shorter you fix the fixed-rate period, the sooner you will notice the negative consequences if the interest rate rises sharply. If you have opted for a very short fixed-rate period, this choice can quickly get you into trouble. Mortgage institutions take this risk into account and apply the principle that the maximum mortgage for a fixed-interest period of longer than 10 years is higher than for a fixed-interest period of 10 years or less.
Maximum mortgage on collateral Not only your income determines the maximum amount you can borrow, the value of the home is also important. After all, the house is the collateral against which the lender provides you with the loan. A distinction applies here between existing homes and new-build homes.
Existing house For an existing home, the mortgage institution will require that the value of the home be determined in an official appraisal report that must be issued by an independent appraiser. In the past, two values were always determined in a valuation report: the free market value and the forced sale value. Today, no foreclosure value is determined. The mortgage assessment is all about the market value. This market value is determined by the lender and can be the purchase price, the purchase / contract price for new construction, or the appraised market value (possibly after renovation).
The maximum mortgage used to be 125% of the forced sale value. This is no longer an issue. In 2014, the maximum mortgage was 104% of the market value. This has been phased out in steps and since 2018 the maximum amount to be borrowed is no more than 100% of the market value of the home. The additional costs must then be paid entirely from our own resources.
New build home For a new-build home, a guarantee certificate must be issued by an institution with the quality mark of the Stichting Garantiewoning. The maximum mortgage for new construction - as with existing construction - was reduced in steps between 2014 and 2018 to 100 percent of the market value.