What is National Mortgage Guarantee (NHG) and is it applicable for Expats in the Netherlands?

The National Mortgage Guarantee (NHG) for Expats applying for a mortgage in the Netherlands

The Dutch National Mortgage Guarantee (NHG) is a government-backed institution that offers banks with a guarantee if a borrower fails to repay their mortgage. This assurance helps lenders reduce risk and allows borrowers to acquire a mortgage with a much lower interest rate. The NHG is available to both Dutch nationals and expats and applies when buying a house in the Netherlands. However, some qualifying conditions must be met in order to be eligible for the NHG.

The National Mortgage Guarantee (NHG) contains a variety of built-in securities, the bank offers you the lowest possible interest rate. These ensure a variety of financial options if you are unable to make your monthly mortgage payments, whether temporarily or for an extended length of time. The primary goal of these conditions is to protect the house and, if required, reduce the mortgage residual debt that could develop after a forced sale. A NHG mortgage may thus serve as a financial safety net in times of financial insecurity, such as divorce, job loss, or other unexpected situations.

The requirements for National Mortgage Guarantee (NHG)

To begin, the property must be registered and bought in the Netherlands and based on the fact that you will live in it yourself (with your family). The property must not exceed a specific maximum purchase price. Every year, this particular maximum is decided again by the Dutch government. It is based on the previous year's average selling price of all residences in the months of June, July, and August. In 2022, for example, the cost ceiling was € 355.000 and in 2023 this will be € 405.000. This indicates that the maximum purchase price or evaluated market value of the residence cannot be more than € 405.000. On top of the purchase price, you can spend up to 6% on energy-saving resources. In such instance, you can borrow up to € 429.300 and still obtain a mortgage via NHG.

Everyone who has an NHG mortgage contributes to the NHG's guarantees. You accomplish this by making a one-time off contribution when you buy the property. When you go to the notary to get the mortgage registered, you make the payment. This contribution or guarantee commission is in 2023 based on 0.6% of the total mortgage amount. You will earn the contribution back within couple of months dependent on the interest rate. One of the most significant advantages of the NHG for expats is that it might make it easier to secure a mortgage in the Netherlands. This is because the NHG guarantee can assist lenders manage risk and increase the likelihood that they would accept a mortgage application. However, keep in mind that the NHG does not ensure that a mortgage will be accepted. The bank will still assess the borrower's creditworthiness and capacity to repay the loan, and the NHG only relates to loan repayment, not property value.

Transferring your regular mortgage into a National Mortgage Guarantee (NHG)

For customers who want to transfer their current mortgage to an NHG mortgage, a few things have changed since past couple of years. If you currently have an NHG mortgage, you only have to pay the NHG contribution fee on the additional amount when you move to a new mortgage. You have to pay the commission on the total mortgage amount. This saves you a significant amount of money.

For example, suppose you had a € 270.000 NHG mortgage that you convert to a € 300.000 mortgage. You will now pay only 0.60% NHG commission on € 30.000, resulting in a contribution of € 180. In prior years, this was much higher and over the entire mortgage amount.

Unfortunately, clients who have a mortgage without NHG and a house with an evaluated market value higher than € 405.000 cannot convert to an NHG mortgage. Until 2020, the size of the mortgage dictated the right to NHG. From 2020, the valuation report value is also taken into account when determining eligibility for NHG. If this applies to you, because the risk of residual debt is reduced, you may typically still receive a cheaper interest rate without NHG if the house value is larger than your mortgage. In reality, the NHG interest rate is frequently somewhat lower than this figure. Also, when switching to NHG, you must always repair or make your house more sustainable, or convert an interest-only mortgage into an annuity repayment scheme or a linear repayment scheme.

In conclusion, the Dutch National Mortgage Guarantee (NHG) is a government-backed scheme that provides lenders with a guarantee if a borrower is unable to repay their mortgage. It is open to both Dutch nationals and expats, but some requirements must be completed. The NHG can make it easier for foreigners to acquire a mortgage in the Netherlands and make property ownership more affordable for them. However, keep in mind that the NHG does not ensure that a mortgage will be accepted.

Would like to have more information about NHG or do you want to speak to one of our experienced advisors? Then get in touch now to discuss your options.