You will see the abbreviation NHG come up from time to time when you are exploring buying your first home. But what exactly is it and is it a wise choice? In short, NHG stands for National Mortgage Guarantee and serves as a safety net if, due to circumstances, the mortgage can no longer be paid or if a residual debt remains after the sale of the home.
NHG limit amount
The NHG has a maximum amount for which it can be taken out. This limit is redetermined every year based on the average house price. In 2022, for example, the NHG limit was set at €355,000. However, there is one exception to this limit: if you want to co-finance energy-saving measures. In that case, the NHG limit is €376,300. This is only possible if the amount above €355,000 is used exclusively for energy-saving measures. If the mortgage or the value of the house exceeds this limit, you cannot apply for a mortgage with NHG.
Advantages of NHG
So, if you buy a home below the limit, it is possible to take out a mortgage with NHG. But what are the advantages?
First, both you and the mortgage lender run less risk with NHG because the mortgage is guaranteed to be repaid. If you face financial hardship due to one of the causes covered by NHG, they will work with you to make the mortgage affordable again so you don't have to move out of your home. Should that not be possible and you are forced to sell the house with a residual debt, NHG may be able to waive that debt.
Secondly, you receive a discount on your mortgage interest rate if you take out a mortgage with NHG. This discount can amount to approximately 0.5% per year.
Disadvantages of NHG
This sounds great, of course, but like many things in life, there are costs involved. The cost for NHG in 2022 was a one-time fee of 0.6% of the total mortgage amount. So, if you want to take out a mortgage with NHG, you must keep in mind that you will need to have some extra capital available. In addition, you will receive a registration with the Bureau Krediet Registratie (BKR) if you need to make use of the NHG debt waiver. This makes it difficult to obtain a new mortgage or loan for five years.
Take all these points into consideration when deciding whether or not to take out a mortgage with NHG. Are you opting for the extra security? Is the home value too high anyway, meaning you don't have a choice? Or is some other reason the deciding factor for you? It’s all fine, as long as you are aware of what it is and what it is for.
