Overbidding and renovation costs

Frequently asked on a house-hunting in the Netherlands is the question over the effect of overbidding on a buyer’s mortgage and whether a buyer within minimum savings may be able to obtain a mortgage for the house + renovation costs. To explain, we tried to simply put the answers and examples for the general cases:

[Note, each case may vary, so it is always wise to advise your mortgage consultant about your specific situation]

Does overbidding a house affect the scope of mortgage I can take out?

Due to overbidding, savings are becoming more and more important in the Dutch housing market of 2021. If you want to buy a house in the Netherlands you need to bring savings to the table. You can get a Dutch mortgage up to 100% of the market value of your house. All the extra costs purchase costs to buy a house and the amount that you overbid on the value of the house to win the offer, you’ll have to pay out of your pocket.

An example for overbidding a house:

Asking price: € 510.000
Purchase price: € 540.000
Appraisal value: € 525.000
Maximum mortgage: € 525.000
Savings needed: € 15.000 > the difference between the purchase price and the appraisal value.

Please note, that the amount of savings in this example doesn’t include the purchasing costs and financing costs you’ll have to pay when buying a house in the Netherlands (about 5 to 6% of the purchase price). This calculation example only covers the amount of savings needed for overbidding.

Can I take out a mortgage on a house that needs renovation?

Starting from 2018, you can borrow in the Netherlands a maximum of 100% of the market value of a house. That means that you have to pay the additional costs out of your pocket. Fortunately, additional financing is possible if you want to renovate the house you buy. Is this your case? Then this is for you!

Renovating an existing home often makes the house more valuable, for example, when you opt for an extension, dormer window, or new kitchen. In an appraisal report, you can record the value of the home after the planned renovation. Based on this, you can get a higher mortgage amount than without the renovation.

The costs of a renovation are often higher than the ultimate increase in value. In that case, you can only co-finance part of the renovation costs. You have to finance the rest of the amount with your own money.

For example, you buy a house for € 450,000 and want to renovate for € 50,000. The value of the house is expected to be € 480,000 after the renovation. You can then get a mortgage for € 480,000 and pay € 20,000 of your own money.

However, in some cases, you may be able to lend more than the 100% mortgage you already obtained or taking out another loan. Most commonly is upgrading the sustainability of the house by, for example, installing solar panels, replacing the windows with HR++ glass, or upgrading the isolation of the house.

Tip! Some contractors who carry out a structural inspection offer an overview of how you may increase your house’s energy label, a certificate you may use later as a quote to the bank.

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