To calculate the maximum mortgage for purchasing a (new-build) home, you must have the following information ready when completing a form: gender, age, annual income, partner’s income, surplus value on the current home, which tax bracket you fall into, the amount of loans outstanding and the amount you may pay in alimony.
Your gender and age are important when calculating the amount of the premium for the term life insurance. The premium counts towards your monthly costs.
The annual income consists of the gross annual salary plus holiday pay (approximately 8%). A useful calculation method for this is to apply the following formula: monthly salary x 12 x 108%. You may also add the gross fixed allowances on an annual basis to this amount. These count as fixed income. You can also count the variable allowances. You must average this by calculating the average gross amount over the last 12 months. However, the variable allowances must have a structural character. If you are self-employed, you can enter the average net profit of the past three years.
For a higher maximum mortgage, you can also include your partner’s income in the calculation. Both incomes are then added together for the final calculation.
Equity on the current home
If you sell your current home and make a profit, this is called surplus value. Since the introduction of the additional loan scheme (2004), the government has encouraged you to use this surplus value to purchase your new home. How do you calculate the excess value? You determine the excess value by deducting the remaining mortgage debt from the value of your current home.
The tax bracket that applies to you determines the mortgage interest deduction you are entitled to. By choosing the correct percentage that corresponds to the gross annual income that you use in the calculation of the maximum mortgage, you can see how much that is. If you have also entered your partner’s income, you only need to include the highest income when looking up the overview.
Overview of Percentages 2010
- income up to 18,218: 33.45%
- income up to 32,738: 41.95%
- income up to 54,367: 42%
- income above 54,367: 52%
If you have loans that are registered with the Credit Registration Bureau (BKR), you must include them in the calculation for the maximum mortgage. Determine the total monthly costs of personal obligations. Loans from the IBG do not count.
Alimony Per Month
Alimony costs affect the maximum amount that can be borrowed. If you pay alimony to your ex-partner, include the (gross) monthly alimony in the calculation. You may not take into account the alimony paid for the children.
Maximum Loan Amount
The maximum mortgage is calculated based on the above information. The calculation results in a maximum amount that can be borrowed, to which you can add the equity of the current home to determine the maximum amount that can be spent. Depending on the mortgage interest rate and the fixed interest period, the maximum amount that can be borrowed may be higher or lower.
Maximum Purchase Price
If you purchase a home, you will have to deal with additional costs (such as the notary, real estate agent and taxes). The maximum price range in which you can search is therefore lower. In most cases, the additional costs are co-financed. This means that the maximum purchase price is lower than the maximum mortgage amount. When purchasing a new-build home, the additional costs are lower than for an existing home because costs such as tax and conveyance deed costs have already been included in the purchase price.