How do you get a mortgage without a permanent contract?

To buy a house, you need money.

Oftentimes we can’t afford to pay such a large sum of money all at once and that’s why we need to lend money from the bank: a mortgage. A mortgage is essentially a huge loan from the bank for which you get 30 years to pay it back.

The house you buy is seen as the collateral of the loan. This means that the bank becomes the owner of your house when you can no longer pay for your mortgage.

It’s important for the bank to know that you can pay your loan. That’s why the bank wants to know for sure that you’ll be able to pay them in the long term. A permanent contract is a direct reflection of your ability to pay-off this loan in the coming years.

Want to know how long you need to be employed to receive a mortgage? Usually, a permanent contract will suffice for the bank. However, they can be critical of you when you’ve just received your permanent contract. Some banks have a waiting period of 3 months. So you’ll need to have had a permanent contract for at least 3 months before they’ll give you a mortgage.

However, it’s become less and less common to receive a permanent contract. Luckily, there are also ways to get a mortgage without a permanent contract.

Do you want to take out a mortgage whilst on a temporary contract? If you are employed with a temporary contract, you can ask for a letter of intent.

What is a letter of intent?

By signing a letter of intent, your employer indicates their intention to keep you employed as an employee for a long period of time, as long as your performance and the market remains the same. Do beware: this does not mean that you will actually receive a permanent contract and no legal rights can be derived from this.

Are you not able to get a letter of intent? And do you want to get a mortgage without a permanent contract or a letter of intent? Then the bank will look at your income. Every bank will look at your average gross income per year for the past three years. If your income over the last year has been the lowest, then this will be your starting point.

It’s also possible that you’re not employed, but that you work as a flex worker.

Flex working means that you work on an on-call basis. This can take place via a temping agency or a secondment company. If you’re paid via a payroll-company instead of via your actual employer, you could also be considered a flex-worker.

Flex working is quite popular in the Netherlands, especially among younger people. And we have good news! Just because you’re a flex worker doesn’t mean that you aren’t eligible for a mortgage. If you can show that you’re earning enough then you will be considered for a mortgage. The bank will then look at your income over the last 3 years and at your most recent payslip.

The increase in flex workers has led to something called a perspective statement.

This is a document that shows that as a flex worker you have a perspective on the labour market. It looks at the future possibilities for you as a flex worker to receive an income. Through one of these statements, banks can gain more certainty that you’ll receive an income in the long term. In a lot of cases it carries the same strength as an employer's declaration.

In the past, such statements were only given to individuals whose temp agencies were registered in the Perspective Statement Foundation (Stichting Perspectiefverklaring). However, since 2019 it’s possible to receive these perspective statements from non-certified temp agencies. The temporary employment agency then makes the request via the External Perspective Valuer, and does not need to appoint its own appraiser.

It’s also possible that you’re working as a freelancer (ZZP’er in Dutch).

In this case, another set of guidelines apply. As a freelancer, your income is the profit that your company makes. The same strategy applies; the bank will look at your income over the last 3 years. Have you just started as a freelancer? Then at some banks you will still be eligible for a mortgage. Some banks will even give you a mortgage after just 1 year of being a freelancer.

Once you’ve put down a bid on a house, it is time to start looking for a mortgage. This doesn’t just involve choosing a mortgage provider. There are different types of mortgages to consider. Would you like to apply for a mortgage interest deduction? Then you will have to pay off part of your mortgage every month. This can be done with an annuity or a linear mortgage.

When choosing for an annuity mortgage the costs that you pay will remain the same for the duration of your mortgage.

This is due to the interest you pay with an annuity mortgage. This can be deducted from your taxes. Since more and more of your mortgage will be paid off, there will be less interest that can be deducted from your taxes and thus your monthly payment will increase a little bit each month.

With a linear mortgage you start high and your payments become progressively less.

Every month you’ll pay the same amount towards your mortgage which in turn means you’ll owe the bank less and less money. This means that there will also be less interest to pay.

More often than not, it is advised to go for an annuity mortgage.

This is because most banks will allow you to pay off 10-20% each year without any financial penalties. By paying off more each month your annuity mortgage will basically turn into a linear mortgage. You’ll end up paying less interest and the final price of your mortgage will be just as low as when you’d taken out a linear mortgage.