Mortgage forms Belgium
Mortgage Types
Belgium has a different financing culture than the Netherlands. Belgian banks take a more traditional approach, focusing on paying off the mortgage. Therefore, the annuity mortgage (mensual mortgage) is by far the most important mortgage form offered. It is not unusual in Belgium to receive a discount on the interest rate if side products – such as debt balance insurance (life insurance) or fire, home insurance – are purchased.
The annuity mortgage is the most widely used form of mortgage in Belgium. However, it is calculated slightly differently than we do. In the Netherlands, the monthly charge is calculated on an annual basis and in Belgium on a monthly basis. This is why in Belgium we speak of mensualities and not annuities. In addition, Belgium has no mortgage interest deduction, which is why the interest-free mortgage has never become popular.
Redemption-free is currently offered on a very limited basis in Belgium to non-resident customers. Only for a certain profile of customers with high income and assets are there options for a grace loan. There are also some Belgian private banks that do so on the condition that a certain portion of private wealth will be invested under their management.
Most Belgian banks do not get excited about loan amounts below €100,000 with a non-resident customer; this is because they are not of sufficient commercial interest. Hypotheek & Buitenland therefore uses €100,000 as the lower limit in terms of loan amount.
Belgian banks offer a wide range of interest rate formulas. It is important to realize that Belgian banks have a legal obligation to build an interest rate cap into their interest rate formula when the fixed rate period is shorter than the maturity. So in addition to fixed interest rates for the entire term, formulas such as 10/5/5 cap 2 are offered. So here the interest rate offered is fixed for 10 years. After those 10 years, the interest rate will be fixed for 5 years and then for another 5 years. The interest rate offered after 10 years cannot be more than 2% higher than the initial interest rate offered.
The interest rate level offered in Belgium to non-resident customers is difficult to compare with Dutch mortgage interest rates due to the fact that interest rate formulas are always offered in Belgium that include an interest rate cap. In general, however, it can be said that the Belgian mortgage market has many providers who compete vigorously with each other. As a result, mortgage interest rates in Belgium are generally quite competitive.
The Belgian financing culture is focused on paying off a mortgage quickly. Therefore, maturities of 30 years are not common. For non-resident buyers, terms of 20 or 25 years are common. See more information on maturities under “Age and maturity”
Belgian banks charge filing and reservation fees. Generally, these are limited to a few hundred euros. In addition, notary fees are associated with the execution (passing) of the authentic deeds (deed of credit opening; deed of mortgage power of attorney; deed of mortgage assignment).
Purchasing debt balance insurance (term life insurance) is usually highly recommended. Most Belgian banks will require debt balance insurance.
When repaying a mortgage loan early, it is legal in Belgium to charge a reinvestment fee (penalty) of up to 3 months the interest on the amount repaid early. However, this fee is not payable in the event of full or partial early repayment of the outstanding capital balance due to the death of a borrower.
A bridging loan is possible if the house being bridged on is also located in Belgium. Bridging on a house located in the Netherlands or a country other than Belgium is not possible.
The release of surplus value through a mortgage is only legal in Belgium if the surplus value is used to buy another property. The scope for releasing money for consumption purposes is particularly limited in Belgium.
