Services Rik Feijen 2 januari 2021

New construction mortgage

Financing a new construction home is a little different than financing an existing home. For example, what about the mortgage? And what is a construction deposit? Read here how it all works.

Maximum mortgage

As with an existing mortgage, the maximum mortgage for a new build is 100% of the value of the property. However, you can include the additional work. The additional work increases the value of the house, so you can include it in the mortgage. The additional work is the extra work that you want to do on top of the standard building plan of the contractor.

You start paying off the mortgage when the land is transferred. From this moment on you pay the principal and mortgage interest. Sometimes you have to wait to pass the mortgage deed at the notary, because the construction has not started yet. When the deed is passed, the land and the work already carried out are paid for first. The rest of the mortgage amount goes into the building deposit.

New homes are often built to last. This means lower energy costs and less impact on the environment. With many mortgage lenders you can apply for a special sustainability mortgage. Want to know more about mortgages? Read more here.

Building deposit

The construction deposit is an account that is reserved for the construction costs of your home. With the money from the construction deposit the bills for the construction are paid. The costs that are paid are the costs of the construction or energy saving measures, so things that are 'attached' to the house. For example, a tiled floor, solar panels, bathroom or extension. When you receive an invoice, you send it to the mortgage lender. The latter ensures that the bill is paid with the money from the construction deposit. For the costs you advance yourself the money is transferred to your account.

Over the amount that is in the construction deposit you receive interest. This is often equal to or slightly lower than the interest you pay on your mortgage. Because the construction deposit empties out during construction you will receive less and less interest. So as the construction progresses you pay more and more for your new home.

The term of a construction deposit is 2 years. If the construction has not yet been completed? Then you can extend it by 1 year.

Interest losses

The difference between the interest you pay to the mortgage lender and the interest you receive on the construction deposit is called loss of interest. You can co-finance this loss of interest in the mortgage. There are two types of interest losses: pre-construction and during construction.

Loss of interest before construction is the period in which you have not yet signed the purchase agreement but the contractor has already started construction. In other words, the contractor is already incurring costs before you have signed. He charges interest on these costs, this is called construction interest.

You will lose interest during construction if you have already signed the purchase agreement but the contractor has not yet started building. You are then already paying mortgage interest. Possibly you can co-finance this in the mortgage, but it is not tax deductible. Therefore, it is better to pay this loss of interest with your own money, if possible.

Double housing costs

If you already have an owner-occupied or rented house, you will have to deal with double charges. This is because you already start paying off the mortgage during construction. If you have savings, you can pay the double burden with them or you can apply for a bridging loan so that you can use the surplus value of your current home for the new one.

Do you have your eye on a new home or are you orienting yourself on the housing market? Please contact our brokers or take a look at our newbuild properties!

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