7 Expensive Mistakes Dutch People Make When Choosing a Mortgage

The Netherlands has one of Europe’s most sophisticated mortgage markets, offering a wide array of options with unique tax advantages for homeowners.

However, this complexity also creates opportunities for costly missteps. With the average Dutch mortgage now exceeding €350,000, even small mistakes can translate to thousands of euros in unnecessary expenses over the loan’s lifetime.

This article examines the seven most expensive errors Dutch homebuyers commonly make when selecting a hypotheek (mortgage) and provides practical guidance on how to avoid them.

Mistake 1: Fixating on the Lowest Interest Rate Alone

Many Dutch homebuyers focus exclusively on finding the lowest possible interest rate, without considering other crucial aspects of the mortgage agreement.

The Real Cost

• Lower rates often come with stricter terms, including higher penalties for early repayment

•Fixed-rate periods with the lowest rates are often shorter (1-5 years), exposing borrowers to interest rate risk

• Discount rates frequently come with higher arrangement fees that can offset the interest savings

Smarter Approach

Instead of pursuing the absolute lowest rate, calculate the total cost of ownership over your planned period in the home. Consider the “rentevaste periode” (fixed interest period) in relation to your future plans. If you anticipate moving within 5-7 years, a shorter fixed period might make sense despite a slightly higher rate.

Pay particular attention to the “boetevrije aflossing” terms (penalty-free early repayment allowance), which typically permit 10-20% of the original loan amount to be repaid annually without penalty. More generous terms can provide valuable flexibility even if the interest rate is slightly higher.

Mistake 2: Choosing the Wrong Mortgage Structure

The Netherlands offers several distinct mortgage structures, each with different tax implications and payment profiles.

The Real Cost

• Selecting an inappropriate mortgage type can result in tens of thousands of euros in unnecessary interest payments or lost tax benefits

• Without proper planning, borrowers may face cash flow issues during the mortgage term

• Some structures that seem advantageous initially may prove costly in the long run

Smarter Approach

Understand the key differences between the major Dutch mortgage types:

• Annuïteitenhypotheek: Equal monthly payments with gradually increasing principal component; fully tax-deductible for post-2013 mortgages

• Lineaire hypotheek: Decreasing monthly payments over time with constant principal component; offers lower total interest cost but higher initial payments

• Bankspaar hypotheek: Interest-only with linked savings account; popular before 2013 tax changes

• Aflossingsvrije hypotheek: Interest-only without required principal payments; now limited to 50% of property value and without tax deduction for new mortgages

For most first-time buyers today, a combination of annuity and linear structures often provides the optimal balance between tax advantages, cash flow management, and overall interest costs.

Mistake 3: Ignoring the NHG Guarantee Option

The Nationale Hypotheek Garantie (NHG) is a government-backed scheme that protects both lenders and borrowers if the homeowner cannot make mortgage payments due to specific circumstances.

The Real Cost

• Forgoing NHG protection when eligible can result in 0.5-0.7% higher interest rates

• Without NHG, borrowers lack protection against residual debt in case of forced sale due to specific hardships

• The one-time premium (currently 0.6% of the loan amount) is often recouped within 2-3 years through interest savings

Smarter Approach

For properties below the NHG limit (€390,000 in 2025), strongly consider this guarantee. Calculate the break-even point for the upfront cost versus interest savings. For a €350,000 mortgage with a 0.5% interest rate reduction, the annual savings would be €1,750, meaning the premium of approximately €2,100 would be recovered in just over a year.

Remember that NHG also provides significant protection if you face financial hardship due to circumstances like divorce, disability, or involuntary unemployment.

Mistake 4: Underestimating the Impact of Oversluiten (Refinancing)

With interest rates fluctuating significantly in recent years, many Dutch homeowners miss opportunities to refinance advantageously or attempt to refinance when it’s financially disadvantageous.

The Real Cost

• Failing to refinance when appropriate can mean paying thousands in excess interest

• Refinancing without accounting for penalty costs can negate potential savings

• Overlooking “rentemiddeling” (interest averaging) as an alternative to full refinancing

Smarter Approach

Regularly review your mortgage terms against current market offerings. As a rule of thumb, consider refinancing when:

• The new interest rate is at least 1% lower than your current rate

• You have at least 5 years remaining in your fixed-rate period

• You plan to stay in your home for at least 3-5 more years

Always calculate the complete cost picture, including:

• Penalty for early termination (boeterente)

• New mortgage arrangement fees

• Notary costs

• Potential changes to tax deductibility

For those facing high penalties, investigate whether your current lender offers “rentemiddeling,” which allows you to blend your existing rate with current lower rates for a weighted average, typically without penalties.

Mistake 5: Misunderstanding How Studieschuld (Student Debt) Affects Mortgage Capacity

Many young Dutch homebuyers are surprised by how significantly their student loans impact their mortgage borrowing capacity.

The Real Cost

• Undisclosed student loans can invalidate mortgage offers and jeopardize property purchases late in the process

• Even when disclosed, many borrowers don’t understand the weighting applied to student debt in affordability calculations

• Incorrect strategies for handling student debt before mortgage applications can reduce borrowing capacity unnecessarily

Smarter Approach

Understand that lenders apply a weighting factor to student loan debt when calculating mortgage capacity:

• For loans under the old system (pre-2015): 0.75% of the original loan amount is counted as monthly expense

• For loans under the new system (post-2015): 0.45% of the original loan amount is counted as monthly expense

This means that a €50,000 student debt under the new system effectively reduces your mortgage capacity by approximately €60,000-€70,000.

Be transparent about student debt during the mortgage application process. Attempting to hide this information is considered fraud and will be discovered through BKR (credit bureau) checks.

Consider whether accelerated repayment of student loans before applying for a mortgage makes financial sense in your situation.

In some cases, maintaining savings for a higher down payment is more advantageous than paying down student debt.

Mistake 6: Failing to Optimize Loan-to-Value Ratio

The loan-to-value (LTV) ratio significantly impacts mortgage interest rates in the Netherlands, yet many borrowers don’t strategically manage this aspect.

The Real Cost

• Higher LTV ratios result in interest rate surcharges, typically in 5% increments starting from 60% LTV

• Each 5% “risk category” increase typically adds 0.1-0.2% to the interest rate

• Missing a lower LTV category by even €1,000 can cost thousands over the mortgage term

Smarter Approach

LTV Category	Typical Interest Impact	Strategic Considerations
≤ 60%	Base rate (lowest)	Consider using available funds to reach this threshold rather than making extra investments
60.1% – 80%	+0.1% to +0.3%	Critical threshold for many lenders; worth finding extra funds to stay under 80%
80.1% – 90%	+0.2% to +0.4%	Consider renovation budgets within mortgage instead of separate financing
90.1% – 100%	+0.3% to +0.5%	Maximum for most Dutch mortgages; includes financing of transfer tax and some closing costs

Strategically plan your down payment to just cross into a lower LTV category. For example, if purchasing a €400,000 home, a mortgage of €320,000 (80% LTV) versus €324,000 (81% LTV) could save 0.1-0.2% in interest, amounting to €4,000-€8,000 over a 10-year fixed period.

Remember that property improvements can also affect LTV. Consider whether certain renovations should be self-funded or included in the mortgage, factoring in the potential interest rate impact.

Mistake 7: Neglecting to Plan for Interest Tax Deduction Changes

The Dutch mortgage interest tax deduction (hypotheekrenteaftrek) is gradually being reduced, yet many borrowers fail to account for these scheduled changes in their financial planning.

The Real Cost

• Overestimating future tax benefits can lead to cash flow problems

• Choosing mortgage structures that maximize deductions without considering their declining value

• Missing opportunities to optimize the decreasing benefit through strategic prepayments

Smarter Approach

Understand the current phased reduction schedule:

• Maximum deduction rate decreasing by 3% annually

• By 2025, maximum deduction limited to 37.05% (down from 52% historically)

• For most middle and high-income earners, this represents a significant reduction in tax benefits

When calculating affordability, simulate your mortgage costs with the reduced tax benefits that will apply during your ownership period. This provides a more realistic picture of your actual housing costs over time.

Consider whether accelerated repayment becomes more attractive as tax benefits decrease. For higher-income earners who previously benefited from high deduction rates, additional mortgage repayments may now provide better returns than some investments.

Frequently Asked Questions

How often should I review my mortgage terms?

Even with a fixed interest period, review your mortgage annually. Market conditions, personal circumstances, and housing policies change regularly in the Netherlands.

Schedule a more thorough review about 12-18 months before your fixed interest period expires.

Is it worth paying for a mortgage advisor (hypotheekadviseur)?

For most Dutch residents, particularly first-time buyers or those with complex financial situations, a good mortgage advisor typically saves more than their fee.

Average fees range from €2,000-€3,000, but advisors often secure better rates and terms than individuals can obtain directly. They also provide valuable guidance on mortgage structure and tax optimization.

Should I choose a longer or shorter fixed interest period?

This depends on your risk tolerance and future plans. Currently, the premium for longer fixed periods (20-30 years) versus medium-term periods (10 years) is relatively small by historical standards.

If you plan to stay in your home long-term and value payment certainty, locking in current rates for longer periods may be advantageous, despite slightly higher rates.

Conclusion

Navigating the Dutch mortgage landscape requires careful consideration of numerous factors beyond simple interest rate comparisons. By avoiding these seven common mistakes, homebuyers can potentially save tens of thousands of euros over the life of their mortgage while maintaining greater financial flexibility.

The optimal mortgage strategy is highly personal, depending on individual circumstances, financial goals, and risk tolerance. Taking time to understand the nuances of the Dutch system—or consulting with a knowledgeable advisor—is an investment that typically yields substantial returns through a more advantageous mortgage structure.