A
Acceptance of mortgage offer By signing the mortgage offer, you conclude the agreement with the bank. You can still get out of it as long as the mortgage deed has not yet been passed by the notary.
Additional Loan Scheme or Limited Mortgage Interest Deduction In practice, this arrangement means that when you move house, you must use the surplus value on your old house in full as financing for your new house, at least if you want to continue to deduct the interest.
Additional payment An additional premium payment to the insurance company with which you can shorten the term of your insurance or you can reduce your periodic premium.
Additional repayment A repayment that you, either mandatory (imposed by the lender) or voluntarily, make over and above the amount that you must repay in the chosen mortgage type.
Administration costs The costs that a mortgage lender charges for handling a mortgage application.
Annuity mortgage The annuity mortgage is a traditional mortgage type in which the sum of the interest and repayment remain the same, without the influence of interest rate changes or additional repayments. In addition, the interest component decreases, and the repayment component increases in the course of the mortgage.
Anti-speculation clause Restrictive condition imposed by the municipality or previous owner on the sale of your house. In most cases you must hand over (part of) the profit within a number of years.
Annuity A type of life insurance where payment of the accrued capital or insured amount upon death is paid periodically in a predetermined period and term. There is the option to deduct the premiums from the tax or to make the payment tax-free for the tax authorities.
Annuity deduction Maximum amounts of deductible premiums set by the tax authorities for an annuity provision.
Additional work/improvement costs The costs that you are confronted with if you have additional work done for a new-build home that was not provided for in the specifications, or have improvements done to an existing home.
Acquisition costs The total amount required to be able to buy (acquire) the house.
Actuarial interest Rate The statutory fixed interest on the amount paid with traditional life insurance policies.
B
Broker’s commission Costs that the broker charges you for their guidance when buying or selling a house.
Bank Guarantee A statement in which the bank guarantees the deposit that the buyer must pay the seller if the buyer remains in default. This statement serves as an alternative to actually paying the deposit.
Bank Savings Mortgage With a bank savings mortgage you save for the repayment of your mortgage through a blocked savings account. You pay a fixed amount in mortgage interest and an amount for your savings account. The savings account has a guaranteed value on the end date, which is equal to the amount of the mortgage loan.
Basic Interest Rate Is the lowest rate of a specific interest rate that is provided under the standard conditions.
BKR Most loans that you take out are registered with the Credit Registration Office in Tiel (BKR). This registration influences the amount of the mortgage you can take out. In addition, the BKR registers whether you are paying the instalments on these loans on time. If you are not, you will be classified under A-code (backlog coding). With such a code it is difficult to get a mortgage, but not impossible
Box I Everyone will have to deal with this box. This box includes income from work, income from home ownership and profits from business. This also includes the settlement of the mortgage interest deduction.
Box II If you are own more than 5% shares of a company (this is called a substantial interest) you will be taxed in this box. A fixed rate of 25% applies for this.
Box III Everything that does not fall in the first two boxes comes under Box III. In practice, this concerns assets such as savings, investments and real estate (which does not serve as the main residence) and debts such as consumer loans and a mortgage on a second home. The tax authorities assume a notional return of 4% on the balance of your assets and debts. This return is taxed with 30%. This amounts to 1.2% tax on your assets (capital gains tax).
Box system With the new 2001 tax legislation, your income is divided into three boxes. The so-called box system. Each tax box has its own rate.
Bridging loan Loan to bridge the time between the purchase of the new home and the sale of the old home, if the buyer’s own money is released at that last moment.
Broad Benefit Insurance Act Insurance act from 1992 to 2000 that limits capital accumulation through capital insurances based on exemptions, duration and maximum investment. Since the introduction of the 2001 tax revision, part of the content has been included in the new box system through transitional law and fixed provisions and exemptions in Box I and Box III.
C
Cancellation Deregistration/cancellation of a mortgage from the Mortgage Register.
Credit mortgage Known as a mortgage registration and mortgage type where withdrawal and repayment are free up to the amount of the registration.
Cancellation fees Some lenders charge fees when you cancel a mortgage, after previously accepting the quote.
Click-fixed interest Variable interest where a ceiling to where the variable interest can rise is contractually agreed. When the variable interest rate ‘touches’ the ceiling, the interest rate clicks against that interest rate until the end of the predetermined duration of the ‘click-fixed’ period.
Commitment Fee If you wish to extend the validity period of an offer, you sometimes pay a certain amount in the event of an interest rate rise.
Completion The moment when the (re)construction of a home is completed and is made available to the (new) resident.
Construction deposit When you have a home built, bills must be paid at different times. In this case, the entire mortgage is taken out at the time of buying the land. The money is stored in a separate account. The bills are paid out of this account. You receive interest on the amount in deposit.
Construction financing A reserved amount specifically for a new-build home. The entire mortgage amount is deposited into an account, out of which you pay the construction instalments. You will receive interest from the bank on the reserved amount.
Construction interest The construction interest is the mortgage interest that you pay for a house that is yet to be built.
Construction instalments The parts of the total purchase/contract sum that, fixed in advance, are charged periodically to the buyer.
Conversion charges The costs that you must pay if you transfer from one fixed-rate period to another, also called extension charges.
Contents Insurance Insurance against fire and other damage of movable property.
Community of property A marriage contract, where both spouses own 50% of the joint property.
Cost of living The amount that you must pay annually for living in your house.
Capital return tax Term for the manner in which the capital minus the debts is taxed in Box III. As a rule, this tax amounts to a rate of 1.2% on current assets after deduction of possible exemptions.
Construction costs All costs including additional work incurred for the purchase of a newly-built property.
D
Daily interest The interest that applies on a certain day for a new mortgage with a certain fixed-rate period. This also applies to an extension of the fixed-rate period.
Deed in hand (vrij op naam or v.o.n) The seller pays the notary fees and transfer tax.
Deed of transfer Deed which the notary draws up when buying and selling real estate and which is registered with the Land Registry.
Deposit interest The interest you receive on the balance of your construction deposit.
Deposit premium The deposit premium is a blocked interest account pledged to the mortgage intended to pay (part of) the premiums of the life insurance policy that is also pledged to the mortgage.
E
Execution value The estimated value of the property in the event of forced public sale.
Expiration Date The date on which a contract or agreement ends. For example, the end date of an insurance policy or fixed-rate period.
Effective interest rate The interest rate that people pay on their mortgage debt, taking into account the additional costs of a mortgage, commission and the time at which the mortgage interest is due (in advance, afterwards, per month or per quarter).
Execution The signing of the mortgage and deed of transfer at the notary, making it valid.
Equity The difference between the value of a property and the mortgage debt, insofar as it is positive. This is the excess value of a home.
F
Financing charges The costs of financing the new house or the replacement mortgage.
Foreclosure Forced public sale of the property.
Free sector Category of new-build homes above a certain price level.
Free sale value The estimated value of the property in case of voluntary sale, under optimal conditions.
Fixed registration Entry in the mortgage register where there is a so-called reduced mortgage. The lender cannot claim more than the outstanding mortgage debt plus interest and costs.
Owners Association If the ownership of a building (apartment, split property) is divided between several owners, the owners jointly form an association. This association is required by law.
Fixed-rate period The mortgage interest rate is agreed upon when taking out the mortgage for a certain period (for example 5 or 10 years). After the fixed-rate period, the interest on the interest-rate revision date is adjusted to the current interest rate for a new period to be chosen by you.
G
Ground lease payments The deductible periodic (municipal) levy on land that has been issued on leasehold.
Guarantee certificate A certificate issued by the GIW (Guarantee Institute for Residential Construction), which indicates that new-build homes are built under certain quality conditions and are guaranteed to be finished or completed.
Ground rent Interest payment for the land costs between the moment of purchase and the moment of actual transfer.
Government contribution A grant that the government provides for (social) owner-occupied or premium properties.
Life insurance An insurance policy that pays out if the insured person dies and that enables the surviving dependants to be able to continue living in the home, because the mortgage can be repaid or reduced. Taking out life insurance is mandatory for some mortgages.
H
Health declaration Form with personal questions relation to your health. It must be completed when applying for insurance with death or disability cover. In the event of doubts about health and high insured amounts, additional questions or a medical examination may be required.
Hybrid insurance Universal life insurance whereby, in addition to the investment funds based on (investment) returns, a fund can also be selected on the basis of a payment equal to the mortgage interest paid on the inseparable mortgage sum. A combination between investing and saving.
Hybrid interest rate Variation on a variable interest. It is a fixed interest rate with generally a higher and a lower margin (hybrid) of a contractually specified interest rate. When the market interest rate exceeds the margin, ‘fixed’ interest is raised or lowered. The increase or decrease is the difference between the higher/lower margin and the market interest rate.
Home insurance Insurance that covers damage to the home itself.
Homeowner interest Term used for loans (not just mortgages) that are used for the purchase, maintenance or improvement of the home. This makes these loans eligible for the mortgage interest deduction in Box I.
I
Inheritance tax After the transfer of property after death, the inheriting new owner must pay tax.
Initial debt Amount of the original mortgage loan.
Investment Mortgage A mortgage which is repaid on the end date by means of a periodically paid amount that is determined on the basis of a minimum expected return.
Interest-only investment mortgage A mortgage which is repaid on the end date by a one-off amount determined on the basis of a minimum expected return. This amount may have been borrowed with the mortgage.
Interest rate buffer See hybrid interest rate.
Immovable property Land and everything that is attached or permanently fastened to or on it.
Interest surcharge A surcharge on the basic interest. For example, in the case of a maximum loan-to-value mortgage.
Interest rate averaging Determine a new interest rate by adding the interest rate of the previous mortgage period to the new (daily) interest rate and taking the (weighted) average. Interest averaging is often applied in the event of a mortgage increase for a renovation or when moving.
Interest period A specific period during which the interest can be fixed for a fixed period. Often a period of one or two years, so that you can wait for a suitable moment.
Interest rate revision The moment when a fixed-rate period ends and a new fixed-rate period must be chosen.
Interest Rate Cap See Hybrid Interest Rate.
J
Joint and several liabilities When entering into an obligation, for example a mortgage, one or more people will be personally liable for the responsibilities arising from that obligation.
Joint mortgage Mortgage that is only granted in households where there are two (fixed) incomes.
K
KEW Abbreviation for Private Home Capital Insurance (Kapitaalverzekering Eigen Woning in Dutch). This insurance is linked to the mortgage on a home that serves as the main home, so that the payment is exempt from tax when it is paid. The maximum exemption from this payment is set annually by the tax authorities.
L
Lifetime mortgage A lifetime mortgage is a type of mortgage where repayment is done through a pledged life insurance policy that pays out at the end of the term and/or upon death.
Linear mortgage Classic type of mortgage where the gross charge consists of the repayment (the mortgage amount divided by the term) plus the interest on the outstanding mortgage balance.
Legal term Period for which the agreement has been concluded and the interest has been fixed. In other words, the duration of the first fixed-rate period.
Land registry State institution where every immovable property is registered. For a fee, anyone can inquire who owns a property at the Land Registry Office. The Mortgage Register is also kept at the Land Registry Office. This allows a check on whether a mortgage has been granted on a particular property.
Legal insurance Insurance that provides legal assistance in legal matters.
Loss of interest during construction Mortgage interest, payable by you during the construction of a house. You have this payment obligation in addition to your current housing costs. You can often co-finance interest losses, so that you do not have double housing costs.
Leasehold The commercial right of use for a piece of land that is not owned. The fee paid for this is called ground lease.
M
Margin interest See hybrid interest.
Mixed endowment insurance A life insurance policy that pays out an amount in the event of death before or being alive on a certain date of the insured person(s). A mixed endowment policy always pays out.
Mortgage account fee This is the amount that the lender charges for setting up the mortgage.
Mortgage points A portion of the mortgage interest to be paid at the start of the mortgage.
Mortgage term The period in which the mortgage loan should be fully repaid in accordance with the repayment schedule agreed upon the provision. This is often 30 years.
Mortgage loan Money loan that is provided with a property, on which the mortgage is taken out, as collateral for the benefit of the lenders.
Mortgage registration A mortgage is registered in the so-called mortgage register. It states the amount and person(s) who have taken out the mortgage. There are several types of registration: the bank mortgage, the credit mortgage and the fixed registration.
Mortgage A notarial security right on a property that states that the property serves as collateral for a claim under certain conditions.
Mortgage deed A mortgage deed is the agreement between you and the mortgage institution, drawn up by the notary.
Mortgage deed fees The costs that the notary charges for passing the mortgage deed, plus the costs of registration in the mortgage register.
Mortgage borrower The owner of the property, who grants the right to mortgage.
Mortgage lender The institution that provides the financing and therefore receives the right to mortgage.
Mortgage register A public administration conducted by the Land Registry in which all established mortgages are registered.
Mortgage interest The cost that is owed for the mortgage loan. The interest on debts entered into for the purchase or improvement of the first owner-occupied home is deductible from the taxable income.
Maximum loan-to-value mortgage If the mortgage amount is higher than a certain percentage (depending on the lender) of the foreclosure value, this is referred to as a maximum loan-to-value mortgage.
Movable property Everything that is not attached or permanently fastened on or to a real estate property.
Mortgage refinancing Taking out the current mortgage again under different conditions and usually at a lower interest rate. It is possible to do this at a different mortgage lender. In most cases, refinancing costs are charged. If the new mortgage is taken out with another mortgage lender or with an increase in the loan amount, you must also take into account the costs of a new mortgage deed.
N
Notional rental value The imaginary income from the owner-occupied home expressed in the so-called notional rental value. In the income tax return, this lump sum must be added to the income. The amount of this tax rental value is a certain percentage of the WOZ value (Property Tax Act) of the home. The WOZ value is the value of the property in unoccupied condition and is determined by the municipality.
National Mortgage Guarantee (Nationale Hypotheek Garantie or NHG) National Mortgage Guarantee stands for a national government scheme, whereby the Home Owners Guarantee Fund (Stichting Waarborgfonds Eigen Woningen) guarantees the payment of your interest and repayment. Your income, loan and home must meet the standards of the Guarantee Fund. Your mortgage may amount to a maximum of € 240,000 (2005), this includes all additional costs. With NHG you will get a discount on mortgage interest from many lenders.
NIBUD Dutch Institute for Budget Information.
Nominal interest The interest on an annual basis, which must be paid in twelve monthly instalments. See also ‘Effective interest’.
Notary fees The notary calculates costs for drafting the mortgage deed and the transfer deed.
Non-contributory insurance On request and in consultation with the company, the premium payment of a life insurance can be stopped while the value is retained and the insurance continues. This often happens with a high policy value and a sufficient number of years of paid premium (according to the 2001 Tax Code).
O
Own money Money that is freely disposable to you, for example, to finance part of your own home or to use for an optimal mortgage.
P
Penalty-free repayment Exempted amount, usually expressed as a percentage of the (originally) borrowed mortgage amount, which may be repaid on the mortgage annually without penalty. Most lenders apply a percentage between 10 and 20%.
Penalty interest The penalty interest is an amount that the lender charges for the early repayment of the mortgage when the fixed-rate period has not yet expired and a valid reason for repayment is not met.
Purchase value guarantee insurance The purchase value guarantee insurance is an insurance that can be taken out in the form of both purchase price and premium payment when purchasing a home. The insurance serves to protect you against falling property value.
Purchase/contract price The amount that must be paid for a new-build home, or a purchase sum for the land and a contract sum for the construction of the home. The purchase/contract price can be increased with construction interest.
Purchase/contract agreement (Provisional) agreement to purchase (building) land and (finish) construction of a home.
Purchase price The amount that you have to pay for the new house.
Purchase subsidy The purchase subsidy lowers the mortgage costs. If you fall within the income limits of the Housing Benefit Act, you may be eligible for a house purchase grant. Buying a home is possible up to a maximum of € 131,950 including additional costs. The required loan may amount to a maximum of € 105,550. Depending on the income and the amount of the mortgage loan, the purchase grant amounts to a maximum of€ 168.14 per month. The purchase grant can be requested from the lender who provides the mortgage. A purchase grant is only granted in combination with a loan with NHG. So, you will also enjoy the benefits of NHG.
Purchasing costs (kosten koper or k.k.) The buyer is responsible for the transfer tax and notary fees, in contrast to Deed in Hand (Vrij Op Naam or v.o.n).
Proof of ownership When the deed of transfer of the house is signed at the notary’s office and the new owner is subsequently registered with the land registry, the new owner receives a copy, the proof of ownership.
Perpetual clause Obligation that is subsequently imposed on new owners of for example real estate.
Prenuptial Agreement Before the marriage, it is determined which assets belong to whom. Future assets will be in the name of the person in whose name it has been contributed.
Premium home New-build residential property that is subsidised by the government in the form of a one-off or periodic contribution. Regulations differ per municipality.
Project mortgage For new construction projects, mortgage institutions sometimes offer a mortgage at a lower interest rate or mortgage account fee than normal. The lower interest usually expires when interest rates are revised.
Pro Resto principal sum The outstanding (mortgage) debt after deduction of all (administrative) repayments and costs.
Porting facility Option to transfer a mortgage to another home within a certain period.
Purchase option Temporary agreement between seller and prospective buyer, whereby the prospective buyer has the first right of purchase for a period at an agreed price. The seller will not sell to someone else during that period.
Property tax (OZB) A tax on a property, divided into a user part and an owner part. As owner/resident you are obliged to pay both.
Prefinancing The grant on premium homes or (social) residential properties can be advanced by the bank and settled between the government and the bank.
Provisional refund A homeowner may state the mortgage interest, among other things, as an income tax deduction. This leads to a tax refund, which can be paid monthly in arrears instead of annually in arrears. You will receive a provisional refund directly from the Tax Authorities. Any overpaid or underpaid tax will in turn be settled arrears with the final income tax assessment.
Provisional purchase contract Agreement in which all matters, including the resolutive conditions, are included with regard to the purchase and sale of real estate. The term ‘provisional’ only relates to the fact that the notary must arrange the final transfer of ownership. ‘Provisional’ should therefore not be confused with ‘without obligation’!
Pledging The obligation laid down through a mortgage deed that (for example) a life insurance policy is inextricably linked to a mortgage as a repayment obligation.
Pledge Gives the pledgee the opportunity to exercise rights to a life insurance policy. You may only change a pledged insurance policy with the pledgee’s permission.
Q
Quality mark Mortgage Mediation Quality Mark that is provided by the independent Quality Mark Mortgage Mediation Foundation (Stichting Keurmerk Hypotheek Bemiddeling). The Quality Mark was created by consumer organisations, among others, to provide clients with clarity about the professionalism and quality of mortgage brokers.
Open end Life insurance without definitive end date.
R
Registration Registration of the mortgage in the public registers, which ensures that the mortgage comes into effect. Registration is provided by the notary and must take place as soon as possible after the mortgage deed has been passed.
Repayment schedule The way in which the debt is repaid in the various forms of mortgage.
Interest-only mortgage An interest-only mortgage is a type of mortgage where only the payment of the interest due is mandatory and can be concluded independently or in combination with another type of mortgage under certain conditions.
Rental clause Imposed restriction on the freedom of renting out the property by a lender.
Reinstatement values The (appraised) amount that is needed to rebuild a home that has been burned down, for example. This value is required for building insurance and can be included in an appraisal report.
Resolutive conditions Conditions in the purchase contract, based on which the agreement can be dissolved in the event of non-compliance.
Residual debt The portion of the original loan that is still outstanding.
S
Second mortgage In certain cases it is possible to take out a second mortgage on the same property, for example when there is equity.
Security deposit Security for the purchase of an (existing) home for the seller up to the transfer date where the buyer transfers an amount (up to 10% of the agreed purchase price) to the notary. This can also be done through a bank guarantee.
Surrender value The surrender value is the amount that is paid out in the event of early termination of a life insurance policy. This is the value of the life insurance policy accrued up to that point, possibly reduced by various costs.
Starter loan The starter loan is an additional loan on a regular mortgage, which can bridge the difference between the costs of purchasing the home and the maximum possible loan for the buyer. The starter loan is provided for a maximum of 30 years and is in any case free of interest and repayment in the first 3 years. After three years, based on your current personal situation, it will be considered whether interest and repayment can be paid on the starter loan. For the Starter Loan a second mortgage is taken out on the home. The starter loan is available in a limited number of municipalities. Each municipality sets their conditions for eligibility. However, the applicant must always take out a mortgage with the National Mortgage Guarantee.
Stable interest rate See hybrid interest rate.
Savings Mortgage A type of mortgage, also known as Improved Lifetime Mortgage, whereby repayment is made by means of a mixed endowment insurance and where the fee is based on a calculation of the savings premium determined by the mortgage interest.
Service charges Costs for collective maintenance, collective insurance and other provisions on a property. Residents/owners of flats, apartments and split properties are faced with service charges.
Selected interest rate See hybrid interest rate.
Switching facility Option to switch from a variable interest rate to a fixed interest rate.
T
Tax benefit The amount reduced on your wage/income tax and social contributions payments relating to, among other things, mortgage interest relief.
Tax deductible Deductible from your taxable income, such as mortgage interest and costs associated with obtaining the financing.
Taxable income The income that determines taxation. The taxable income is determined through the box system and includes income from work and owner-occupied property, additions (such as company cars and notional rental value) and deductions (such as mortgage interest paid and maintenance/child support paid).
Tax credit Fixed discount on the total tax sum (instead of tax-free sum) in the current tax system (2001). In addition to this general discount, there are additional discounts such as the elderly person’s tax credit and the employed person’s tax credit.
Transferable premium The grant that transfers from the old to the new owner of a premium home.
Transfer tax This tax is levied on the transfer of an existing property and amounts to 6% of the purchase value. The buyer usually pays this tax. No transfer tax is payable for a new-build home. In some cases this does apply to the land.
U
Unit Participation (share) in an investment fund.
Unit-linked insurance Insurance where savings are made by investing in one or more investment funds. The savings are used to purchase ‘units’. It is often possible to choose from, for example; shares, bond and mix funds.
Universal-Life insurance Insurance set up based on the Universal-Life principle whereby the premiums invested are invested in units. Those units are resold to finance certain coverages in the event of death and disability. This type of insurance is characterised by a high degree of flexibility.
V
Valuation of Immovable Property Act (WOZ) Ensures uniform valuation of all real estate in the Netherlands that is involved in taxation. The law requires municipalities to determine the value of a property once every four years, based on which your property tax and rental value lump sum are determined.
Valuation Valuation of the house at a particular time. The valuation must be done by a certified appraiser. The costs depend on the value of the house.
Variable interest You do not pay a fixed percentage, but an interest that varies per month or quarter.
W
Widow statement Statement in the form of insurance whereby, to save the inheritance tax, the borrower’s spouse is the first beneficiary of the insured capital in the event of death, under the obligation that the payment will be used for the repayment of the mortgage debt.
Will Provision in writing (by the notary) determining a beneficiary, which is more specific than the legal inheritance law.