Are you living in the Netherlands as an expat and benefiting from the 30% ruling? If so, you may have a higher net income than someone earning the same gross salary without this tax benefit. But does this also mean you can borrow more to buy a home?
The answer is: not with most banks, but there are exceptions. In this article, we explain how the 30% ruling works, how banks calculate your maximum mortgage and what options may be available to make use of this tax benefit.
What is the 30% ruling?
The 30% ruling is a Dutch tax arrangement for certain employees who move to the Netherlands from abroad to work here. Its purpose is to help employers attract international talent and compensate employees for some of the additional costs associated with relocating to the Netherlands.
If you meet the requirements, your employer may be allowed to pay part of your salary tax-free, subject to certain conditions. This can amount to up to 30% of your salary, within the applicable legal requirements and income limits.
As a result, you pay less income tax and take home more money each month.
The ruling does not automatically apply to every expat. You must meet specific eligibility requirements, and your employer must apply for the ruling together with you through the Dutch Tax Administration.
How long does the 30% ruling last?
The maximum duration is five years. Previous periods of residence and employment in the Netherlands may count towards this period under certain circumstances. Depending on your personal situation, the actual duration may therefore be shorter.
How do banks calculate your maximum mortgage?
When you apply for a mortgage, the bank looks at your income and financial commitments to determine how much you can responsibly borrow.
In principle, the same mortgage affordability rules apply whether you are Dutch or an expat. Banks assess your income according to the applicable mortgage lending standards and their own lending criteria.
Your financial commitments also play an important role. These may include:
A personal loan or other credit commitments.
Alimony payments.
Private lease agreements or other financial obligations taken into account in the mortgage assessment.
These commitments can reduce the amount you are able to borrow.
Banks also look beyond what you can afford today. They need to assess whether you can continue to meet your mortgage payments responsibly over the longer term.
Can you borrow more thanks to the 30% ruling?
The 30% ruling increases your net income. It may therefore seem logical that you should also qualify for a higher mortgage.
However, most banks do not take the additional net income resulting from the 30% ruling into account when calculating your maximum mortgage.
The reason is that a mortgage typically has a term of 30 years, whereas the 30% ruling is temporary. Once the ruling expires, your net income may decrease, while your mortgage payments will continue.
Banks therefore assess whether your income is sufficiently sustainable to cover your mortgage payments over the longer term.
There are exceptions, however. A limited number of mortgage lenders offer options to partially take the 30% ruling into account when calculating your borrowing capacity.
How can you borrow more with the 30% ruling?
With certain mortgage lenders, it may be possible to include the tax-free portion of your income in the calculation of your qualifying income for the remaining duration of the 30% ruling. Under the lender's conditions, this portion of your income is grossed up for mortgage assessment purposes.
This can temporarily increase your qualifying income, potentially allowing you to borrow more.
The additional borrowing is then placed in a separate mortgage loan part. The term of this loan part cannot exceed the remaining duration of the 30% ruling.
A higher mortgage for a limited period
Suppose you have two years remaining on your 30% ruling. A lender offering this option may, subject to its conditions, take your higher qualifying income into account for those two years.
The additional loan part must then be repaid within that period. For example, your main mortgage loan part could have a term of 30 years, while the additional loan part has a maximum term of two years.
This may allow you to obtain a higher mortgage at the outset than you would with a bank that does not take the 30% ruling into account at all.
A shorter repayment term generally means higher monthly repayments. As a result, the additional borrowing capacity is limited. The amount you can borrow depends on factors such as your income, the remaining duration of the ruling and the lender's conditions.
Is it a good idea to use the 30% ruling when calculating your mortgage?
Being able to borrow more temporarily does not automatically mean it is the best option for you.
It is important to consider your financial situation after the 30% ruling expires. Your net income may decrease at that point. In addition, an extra mortgage loan part with a short repayment term can result in relatively high monthly payments during the initial years.
A good mortgage assessment therefore looks beyond the maximum amount you can borrow today. You also need to know whether the mortgage will remain affordable once your tax benefit ends.
That is why it makes sense to compare different scenarios: a mortgage calculated without taking the 30% ruling into account and a mortgage in which the ruling is included, where possible.
Buying a home in the Netherlands with the 30% ruling?
Are you benefiting from the 30% ruling and planning to buy a home in the Netherlands? It is worth exploring which mortgage lenders offer options for your specific situation.
At Kamp & Vulhop, we help expats find a suitable mortgage. We look not only at your income, but also at the remaining duration of your 30% ruling, your financial commitments and the long-term affordability of your mortgage.
Contact us for a personalised calculation of your maximum mortgage, both with and without the 30% ruling. This will give you a clear picture of your options before you start looking for a property or make an offer.
