Mortgage options for self-employed professionals

Can you get a mortgage if you are self-employed and just started out on your own? Absolutely, if you ask De Hypotheker’s Marcel Snoek. For a very long time, new entrepreneurs struggled to get a mortgage. But now even people who have been in business for less than three years can land one relatively easily. Read more to find out what mortgage options there are for starting zzp'ers.

New entrepreneurs often have to grapple with some degree of financial uncertainty, as you will often have to make significant investments at first and your income might not be as high as it will be. As a result, mortgage lenders used to be reluctant to provide mortgages to self-employed people, requiring at least three years’ worth of good earnings. Mortgage advisor Marcel Soek explains what has changed in the mortgage market and why even new entrepreneurs can still get a mortgage. 

Major turnaround in mortgage market 

"In the last 5 to 7 years, there has been a major turnaround", Soek begins, "with more and more lenders expressly targeting entrepreneurs. Some lenders, for example, have started using employment income from the past to determine a qualifying income for new entrepreneurs." Soek adds that the Nationale Hypotheekgarantie (NHG, National Mortgage Guarantee), which supports lenders in providing mortgages to entrepreneurs, has been a great help. "Banks are aligning their policies with those of the NHG." 

A specialising market 

For truly brand-new entrepreneurs, applying for a mortgage remains tricky. After all, you have to be able to prove that your business is making money now and will continue to do so in the future, which is almost impossible if you have only just started out. To qualify for a mortgage from a bank, your business will usually have to be at least one year old. 

If you have been in business for less than three years, lenders will not always consider your full qualifying income.

In Soek’s expert opinion, the mortgage market is specialising. "That is one of the reasons why self-employed professionals now have more options. Providers targeting entrepreneurs have in-house knowledge to help them analyse the annual figures published by small businesses. Mortgage lenders who outsource the process of determining an applicant’s qualifying income will usually not look that closely at each applicant." 

When reviewing your application, a mortgage lender will look at, among other things: 

• What industry you work in (due in part to the corona effect). 

• Your fixed expenses. 

• How much risk you take with your business. 

• How your business and profits have developed. 

• Your expectations for the future of your business. 

Mortgage amount 

When you start looking for a house, you generally want to know how much you can borrow. Salaried workers can use an online tool to get an idea of what they can borrow because their income is the same each month. For entrepreneurs, determining the so-called qualifying income is more complicated, because their income can fluctuate from month to month and year to year. 

Making a forecast can help you gain some degree of insight into the future.

Soek recommends consulting with an independent mortgage broker before starting your search. Different mortgage lenders offer different options for entrepreneurs, with many taking only a certain percentage of the full qualifying income if you have been in business for less than three years. "You will have to sit down and talk to a mortgage adviser at some point anyway, so you might as well do it in advance. Besides, it can help stave off disappointment." 

In today’s housing market, it is particularly valuable to know exactly what you can spend in advance. "Otherwise, buyers who can afford to buy a house cash will always beat you to the punch." What is more, it is now normal for potential buyers to put in bids considerably over ask, so your best option is to start looking in a slightly lower price range. 

It is important to know that mortgage lenders will only offer a mortgage up to the list price of the house, so you will need your own money to cover other costs. When buying a house, these extra costs are usually about six percent of the list price. In 2020, the average house price was €334,000 (source: Statistics Netherlands), which means you would have to save up about €20,000 yourself. 

Preparing your mortgage application 

It is important to look at every last detail when preparing your mortgage application, as you are basically trying to convince the bank that you can pay for your mortgage now and in the future. Soek: "Talk to your  accountant,  get your financial statements in order and review this year's figures. Your accountant can also help you draw up a forecast to give you a good idea of what lies ahead." 

More and more parties are targeting entrepreneurs.

Tip: Taking out disability insurance can be a big help. Employed people are automatically insured against disability through employee insurance, which means they are entitled to benefits if they fall sick or become incapacitated for work. Self-employed professionals have to take out insurance against this risk themselves or risk losing their income for an extended period of time, at which point they may no longer be able to pay their mortgage. 

Income statement 

Mortgage lenders will usually ask you to provide an income statement. You can request these statements from specialised agencies. Important: Some banks only work with specific designated agencies 

that look at your financial statements and income tax returns to prepare your income statement. If you have been in business for less than three years, the agency might also look at income earned from employment before you were self-employed. For an NHG mortgage, your income statement must be no more than six months old. For other mortgages, different providers have different validity terms. 

Mortgage with NHG 

Entrepreneurs also qualify for NHG mortgages, which are guaranteed to meet NIBUD’s responsible borrowing standards. Moreover, NHG mortgages provide you with insurance if you are unable to pay your mortgage due to unemployment, the end of a relationship or the loss of your partner. 

Entrepreneurs must have been in business for at least one year before they qualify for an NHG mortgage. Many mortgage providers have more lenient terms if you take out a mortgage with NHG, such as using 100% of your qualifying income to determine your maximum mortgage or only requiring a single financial statement instead of three. If you want an NHG mortgage, you will need to have an income statement prepared by an NHG-recognised agency. 

Negative corona effect 

What if your income has taken a big dip due to the corona crisis? "That definitely affects how much you can borrow," Soek admits. "We do not know what will happen in the future. Banks are in the dark and want to prevent people from entering into obligations that they cannot fulfil." 

Since the corona pandemic, mortgage lenders have been asking entrepreneurs to complete a corona questionnaire. They want to know to how the crisis has affected you, whether you received government support and whether you have any reserves to cope with future setbacks. Soek: "We then talk to the applicant to get a better idea of their situation: how likely is it that they will start earning money again next year? You have to convince the bank that you are not a very risky proposition." 

Whatever the reason, if you make less money than usual in any given year, you will be able to borrow less. If your business is doing better this year, you might consider postponing buying a house until next year to end up with a higher qualifying income. 

Growing business 

Although many have struggled, some companies have gone from strength to strength during the crisis. Most banks look at your average profit over the past few years, one very good year can still net you a higher mortgage if the bank decides to factor in growth potential and increase the weighting of more recent years. 

Example 

In your first year of self-employment, your profits totalled €25,000, in year 2, they grew to €35,000, before ballooning to €50,000 in year three. Normally, banks will average these three years, which boils down to €36,666. If they factor in growth potential, the first year may count once, the second year twice and the third year three times, resulting in a substantially higher qualifying income of €40,833. 

List of mortgage lenders 

Want to know which mortgage lenders provide most options for self-employed workers? In this list, you will also see whether the bank has a special calculator for entrepreneurs and how long you have to have been in business before qualifying for a mortgage. 

Mortgage provider	Mortgage from how many years as a business	Calculation tool (suitable) for entrepreneurs?
ABN AMRO	1 year	Yes
Aegon	1 year	No
Allianz	1 year	No
Argenta	1 year	Yes
ASN	1 year	No
a.s.r.	1 year	No
Attens Hypotheken	1 year	No
BLG Wonen	1 year	No
Florius	1 year	Yes
Hypotrust	1 year	Yes
ING	1 year	No
IQWOON	3 years	Yes
Lloyds Bank	2 years	No
Lot Hypotheken	1 year	Yes
Munt Hypotheken	3 years	Yes
Nationale Nederlanden	1 year	Yes
NIBC Direct	1 year	Yes
Obvion	1 year	Yes
Rabobank	No minimum, Rabobank looks at your personal situation	No
RegioBank	1 year	No
Robuust Hypotheken	1 year	Yes
SNS Bank	1 year	No
Triodos	3 years	Yes
Tulp Hypotheken	1 year	No
Woonfonds	1 year	Yes

 

The data in this table are based on the information found on the websites of the respective mortgage lenders.