A considerably lower purchase price, low monthly costs – even the possibility to take a first step on the housing market. Buying a house with a discount scheme offers clear advantages. At the same time, some constructions are so complicated that buyers do not understand the details.
That was the reason for the organization behind the National Mortgage Guarantee (NHG) to draw up rules that should increase clarity. They will come into effect on 1 January for mortgage loans under an NHG guarantee. With this guarantee, buyers of a house can borrow up to 355,000 euros (2022) cheaper.
Arrangements to help first-time buyers and other groups who find it difficult to buy a house have been around for a long time. For example, the 1970s had the premium purchase scheme. For years, the government gave a subsidy with which buyers could pay a large part of their mortgage.
Ground lease
In recent years, more and more schemes have been set up whereby buyers sometimes receive tens of percent discounts to lower the threshold to a new-build home. They all work on a leasehold basis. Normally you buy a house or apartment, but not the land. The leasehold construction is used here to properly record all agreements legally. The simplest arrangement is that a buyer takes out a mortgage for the home and also pays a canon, an annual amount for the use of the land. This amount is lower than the mortgage costs for the home including land. As a result, a better home can be bought than the income actually allows.
There are also schemes where the canon is low or zero, and schemes where buyers receive an additional discount. This actually involves deferral of payment of part of the purchase price, but this also increases the purchasing options for a starter. This ‘deferred portion’ must be repaid upon sale, or if the owner can obtain a mortgage loan for it. For all constructions, the home buyer can still acquire the land.
Apartment in center
The Almere company DNGB devised various schemes to help people buy a house, including the starter discount. Director Olav Koenders: “People who can buy a home with a starter discount really have a lottery ticket. They receive a discount and do not pay canon. It couldn’t get any better for a customer.”
Financiers are often large investors such as pension funds and insurers. DNGB draws up and manages the contracts.
Karin Reintjes bought an apartment in this way in 2020 in the center of Eindhoven, where the housing market is rather overwrought due to the highly educated population and the many expats. She paid 192,000 euros for a 63 square meter apartment, part of a renovation project with twelve homes. She did not have to buy the land, which would otherwise have cost another 90,000 euros. Because she had some money of her own, a mortgage of 154,000 euros was sufficient. “I don’t think I could have gotten a lot more mortgage with my salary. You can’t buy an apartment in the center for 192,000. For me as a woman alone it was the ideal situation.”
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Tax return
The arrangement with which Myrthe Kostense from Zaandam bought her house was considerably more complicated. In 2018, she bought a single-family home that was built in 2009 by Affordable Koopwoningen Zaanstad (BKZ), a company owned by the municipality. This scheme also has very favorable conditions, says Kostense, but it does require a good eye for your finances.
The previous owner had bought the house without the land, and also paid only 70 percent of the purchase price. The remaining 30 percent was divided into three equal parts. The condition is that as soon as the owner’s income or assets increase, he must take out or pay off part of the mortgage. The other parts follow the next two years. The canon contribution is also income-dependent. “That is why you have to submit your tax return every year.”
When Kostense, a real estate agent by profession, bought the house in 2018, that 30 percent was still outstanding. But because she had surplus value from a previous home, she was not allowed to postpone the purchase of this remainder. It meant that she paid 70 percent of the purchase price to the seller and the rest to BKZ.
She hasn’t bought the land yet. That brought the house within her reach at the same time. Because it meant she had to finance a lower amount, but also because she could use the scheme when bidding. The house was for sale for an asking price including the land, while Kostense knew that she did not have to take it over. “I knew the scheme and deducted the land value from the purchase price for myself. Then I had extra room to outbid.”
When she agreed with the seller about the purchase price, she indicated that she did not want to buy the land yet. She can still buy those meters in 2034 at the latest, for a fixed amount that is determined in the year of construction.
A sudden increase in the ground rent or the mandatory payment of a deferred part of the purchase price can come as a surprise, says Kostense. “If you win the lottery, receive an inheritance, or your wealth increases in some other way, BKZ is first in line. That makes a lot of sense, but some people find that annoying. Without these arrangements, many people will never be able to buy a house, but they must understand what they are buying.”
Sprawl
NHG has also realized that not everyone understands the agreements properly. The organization saw the special arrangements for homebuyers “pop up like mushrooms.” Although the intentions are good, they don’t always work out in the best interest of the consumer. This is especially true in the event of rising canon payments or compulsory purchase of the land.
“We have seen proliferation, both from municipal and private angles,” Koenders of DNGB agrees. “There is no clear supervision of leasehold arrangements. NHG will have seen the need to regulate the market somewhat, and to map out what is and what is not possible.”
And now there are those requirements that the schemes must meet if the buyer wants to qualify for a mortgage with NHG. For example, providers must add a package leaflet in understandable language. Limits have also been set for the annual increase in the ground rent, and there should be no obligation to buy land or discounted parts. NHG maintains a list of approved schemes.
Kostense thinks that despite the complexity it is important that there are still opportunities to buy a house in this way. “Otherwise I would have only been able to buy an apartment. Now my children and I have a single-family home with a garden. You can gradually become more owner and grow into a home.”
Reintjes has already sold her apartment in Eindhoven and has moved abroad. In doing so, she made a considerable profit. She could keep it. Her so-called Duokoop arrangement has been transferred to the next owner.