The mortgage mistake almost every buyer makes
When you decide to buy a house, the first thing you do is check how much you can borrow. Online calculators tell you in seconds. Enter your salary and deposit, and your budget appears to be €50,000 more than you thought. You are then straight on Funda to daydream about the extra bedroom or garden you thought you could not afford.
But your borrowing capacity is not your budget. It is a potential maximum figure that ignores your actual life, including:
- The lifestyle you want (are you ready to cut down on meals out, nice clothes, and holidays to pay the mortgage?)
- Your future plans (do you want to travel, have a baby, or start a business? Then you will need a financial buffer.)
- Your day-to-day costs (do you have an expensive commute, car loan, or childcare fees? If so, your disposable income might be much less than the calculator suggests.)
All these things make a difference to whether your mortgage payment is realistic for you, not just whether you could pay it in theory.
Overbidding and your budget
Overbidding is part of the housing market in the Netherlands. Homes are listed with an asking price, but the real price is usually higher. Perhaps 2% more, perhaps 10%, perhaps even 20%.
Few buyers manage to secure a home without bidding over the asking price. Even small percentages can add up to a significant amount of money to find. Your budget must take the potential overbid into account.
On a €400,000 property, you pay an extra €8,000 if you overbid by 2%. If you overbid by 20%, you pay an extra €80,000. Your overbid cannot be added to your mortgage; you must have the money ready in savings.
It is essential to:
- Be clear before you bid what your maximum overbid is. If you know you cannot go over 10%, stick to that and do not get drawn into a bidding war.
- Find out what the likely sold price is. Huispedia gives you an idea of recent sold prices, but Roofmatch uses an smart AI bidding calculator that works with 12,000 data points to provide more accurate predictions.
The hidden costs of buying a house
The overbid amount is not the only extra cost. You will also need to cover the following from your savings:
- Transfer tax of 2% of the purchase price (unless you are a first-time buyer under 35, buying a property for less than €555,000).
- Notary fees: €1,000 to €3,000.
- Mortgage advisor: €2,000 to €3,000.
- Valuation fees: €500 to €1,000.
- Building inspection: around €500.
- Buyer’s agent fees: traditional agents charge 1% of the purchase price, or a fixed fee of around €4,000. If you choose Roofmatch, you will pay from €2,599.
Why being clear on your real budget is important
If you are not clear on your budget, including all extra costs, you are guessing what you can bid. Given this is the biggest purchase of your life, that is risky.
If you are a cautious person, not being clear on your budget might mean that you end up bidding lower than you could have done. Often, that means you lose a home you really wanted. If you are a risk-taker, you might end up bidding more than you can afford, especially if you get emotionally attached to a property.
That could mean:
- Having to pull out of the purchase, leaving you liable for a penalty of 10% of the price.
- Getting the property, but being left with no savings for new furniture, renovation, or repairs.
- Struggling every month to pay the mortgage, so your lifestyle takes an unnecessary dip.
From budget clarity to smart bidding
At Roofmatch, we ensure our clients are clear on their potential budget and have a mortgage in place. We also ensure that every buyer makes the most of the budget they have through our smart bidding system.
This uses AI to recommend the most likely winning bid, using 12,000 data points. Paired with human evaluation from our experienced agents, our clients:
- Do not pay more than they can afford, as their budget is clear from the start.
- Do not risk bidding higher than they need to.
- Do not bid too low and miss out.
Interested in our smart bidding system? Tell us about your plans on a free, no-obligation call.