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Buying a New-build House in the Netherlands

24th of June 2024

Buying a new-build property instead of an existing house comes with its pros and cons. The buying process of a new-build property differs from the standard process of an already existing house. Naturally, each option has its own benefits and downsides. In this blog, we will explain the process of purchasing a new-build property and the associated mortgage. Additionally, we will outline the advantages and disadvantages of buying a new-build property.

Mortgage process for a new-build property

Obtaining a mortgage for a new-build property is very similar to applying for a mortgage for an existing house but the way you pay the monthly instalments differs. First, it is crucial to calculate your maximum mortgage capacity and determine how much money you can borrow from the bank. In this case, the maximum mortgage that can be obtained is equal to 100% of the house value. Since new-build properties already have all the energy-efficient solutions included, the 106% loan-to-value mortgage is not applicable. House value is determined by the sum of the purchase agreement and the construction agreement. For properties that cost € 750k or more, most banks will ask to perform a valuation report.

The main difference between buying a property directly from a developer and buying it from the secondary market is the loan repayment process. From the day of signing the notarial deed regarding the new property, the repayment of instalments begins, as the mortgage must be repaid within a maximum of 30 years. 

When purchasing a new property, you first purchase the land and the rest of the mortgage remains in a separate construction account (bouwdepot) at the bank. You only start paying interest on the amount that has been withdrawn. However, the remaining amount of the mortgage loan remains in the construction deposit at the bank, where interest is accrued at the same interest rate that you pay on the mortgage.

The initial mortgage proceeds are used to pay for the land and initial construction work. The remaining amount of the mortgage loan is deposited in bouwdepot. As construction progresses, the contractor submits invoices, which are forwarded to the bank, and the bank pays the outstanding amounts to the contractor. Once construction is completed and the property is handed over, the borrower begins to repay the full mortgage amount, which includes both principal and interest, in accordance with the terms agreed in the mortgage offer.

Buying a new-build property involves double costs. You must pay both the current rent or mortgage and the mortgage interest on the new property. There are two possible scenarios: if construction has not yet started, you pay construction interest; if construction has already started, you pay capitalized interest. This means that the developer adds interest to the purchase price for expenses that have already been incurred.

Buyer’s costs

When buying a new-build property directly from the developer, you don’t have to pay several ‘buyer’s costs’ that are usually incurred when purchasing an existing property. When buying a new-build house, you avoid the following costs:

  • Transfer tax: This is one of the biggest expenses from the buyer’s costs. In this case, it is not applicable since there is no transfer of ownership; you are the first owner.
  • Valuation costs: Unless the property costs more than 750k euros, then there is no need for a valuation report since it is a newly build property and there are no hidden flaws or defects.
  • Real estate agent: While you can use the expertise and knowledge of an agent, you can also search for the house on your own and save on the commission fee. Unlike with existing properties, where a real estate agent is highly recommended, it is possible to find your dream home without additional help when dealing with new-builds.
  • Ownership deed at the notary: In this case the seller bears the costs of transfer of ownership

Advantages of buying a new development

Buying a newly build apartment has several advantages. First and foremost, there is a fixed price offer for the house, so there is no overbidding. If you win the lottery and get selected for the property, you can be sure that the asking price will be the final price you pay. Since it is a new development, there won’t be any maintenance required on the building for several years. Additionally, new houses are build with all possible energy efficiencies, including good ventilation and insulation systems, which translates to lower monthly utility bills. As mentioned earlier, some of the buyer’s costs are not incurred when buying a new development. Lastly, you have the freedom and flexibility to design the house to your liking.

Disadvantages of buying a new development

Buying a new-build property also comes with some disadvantages. To purchase a new development, you need to take part in a lottery and win it. It is important to be prepared, patient, and understand that you might need to participate in several lotteries before winning one. Another drawback is that you cannot visit the house since it’s not build yet; you choose the house based on renders, sketches, and drawings. These renders are usually a good example of what you can expect once the property is build. Additionally, the construction period may take longer than expected, potentially delaying your move-in date. Often, the floors, kitchen, and bathroom are not included in the purchase price, which means you need additional savings to make the apartment liveable. Lastly, if you decide to purchase a new development, it can take up to 2-3 years to finish the project. During this time, you will need to start paying the mortgage alongside your monthly rent or your current mortgage.

To sum up, buying a new-build property is different from buying an already existing house. There are several advantages, such as excluding some of the buyer’s costs, no overbidding, and the inclusion of sustainable and energy-efficient solutions. On the other hand, you do have to start paying the mortgage immediately, alongside your monthly rent, and wait 1 or 2 years for the new house to be completed.

When you decide to buy a property in the Netherlands, the most important thing is to have your maximum mortgage capacity assessed by a financial advisor. In the case of a new-build property you also need to find out whether you are able (and willing) to carry the double costs, these of your current house (with current mortgage or rental) and the new-build property.  Once you know your possibilities, you can start searching for your new house.

If you have any additional questions regarding the mortgage process for new-build properties, do not hesitate to contact us. We will gladly explain the whole process and answer your questions.

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