What is National Mortgage Guarantee?
This is a guarantee provided by a special foundation (WEW, short for Stichting Waarborgfonds eigen Woning), to the mortgage lender (the bank). This guarantee means that the bank can claim repayment of the loan from this foundation, should the client be unable to repay the mortgage due to circumstances outside his or her own control.
How does it work?
Well, first of all you have to qualify. This means that your salary has to be sufficiently high to be able to get NHG. This is often the case, since the banks have similar criteria to calculate how much you can borrow on your salary anyway. However, the maximum NHG loan is € 265.000. Until 1st January 2011 (so for the rest of this year), there is a temporary maximum loan of € 350.000. Part of this amount is for the additional purchase costs that apply when buying a home. For an existing home 12% of the NHG loan is for these additional costs and 8% for a newly built home. In practice this means that an existing home may cost no more than € 312.500 if you wish to apply for NHG and for a newly built one the maximum purchase price is € 324.074. But remember, after 1st January 2011 the maximum NHG loan drops back to € 265.000. So loans over and above this amount cannot qualify for NHG.
Which other criteria do you have to meet?
First of all you have to have permanent residence (so either you are European, or you have a permanent residence permit). And you have to have an indefinite contract of employment. Should you have a temporary contract, you will have to be able to show three years of income for the years prior to the year of application. The average of the income of these years has to be high enough to meet NHG criteria. Once all criteria are met, you need to pay 0,55% of the mortgage amount which will be paid into the NHG fund. This amount is normally part of the k.k. (buyers costs) and therefore integrated in the mortgage amount.
What is the bank’s advantage?
The bank has the security that should the client default on his mortgage due to unemployment, divorce, disability or death, the NHG fund will pay out the difference between the selling price and the mortgage. For this reason, the banks offer a lower interest rate to the NHG mortgage client.
What is your advantage?
The same security applies to the client. If the home owner cannot pay his or her mortgage due to the circumstances described above, first of all an additional loan for a maximum period of two years can ensure the temporary payment of the mortgage. This way his or her household has more time to prevent a forced sale. Again, this only applies if the financial problems are caused by divorce, unemployment, disability or death of the partner. This special facility can increase the mortgage by a maximum of 9% of the total mortgage sum. Once the income has been restored, the additional loan will have to be repaid.
Another big advantage is a lower interest rate. On average, NHG loans offer a rate which is 0,5% lower than other fixed rates. The exact rate may differ depending on the mortgage bank in question.
Refinancing your current mortgage to NHG
This is possible. However, apart from having to meet the criteria mentioned above, the maximum NHG loan for refinancing cannot exceed € 265.000 (no temporary increase to € 350.000 applies). Furthermore, part of the new mortgage will have to be used for either home improvements, or to obtain (buy) a larger part of the house due to divorce or to pay off the land lease (erfpachtcanon).
How do you apply for NHG (National Mortgage Guarantee)
Contact us or your financial advisor. They will know the rules and regulations of NHG and tell you soon enough if you qualify for an NHG loan.