BONAIRE–The Dutch Ministry of Home Affairs and Kingdom Relations BZK will begin sometime early 2019 with an experiment on mortgage guarantee in Bonaire.
The scheme must stimulate home ownership for starters, young families and the social middle class. This five-year experiment will implement administrative agreements from the recently concluded protocol with the overseas public body of the Netherlands.
Several challenges regarding the financing of owner-occupied homes mean that few houses are sold within the Caribbean Netherlands. For example, banks generally finance up to 80 per cent of the property value. As a result, potential home buyers must contribute a considerable amount of equity capital.
In addition, the period of repayment for the mortgage applicant must end when they are 65, making it difficult to take out a mortgage after the age of 35.
In the Netherlands, the National Mortgage Guarantee NHG stimulates the affordability and accessibility of home ownership. This arrangement limits the financial risks of buying a house.
“Furthermore, it is often accompanied by an interest discount reducing the risk for the bank. A mortgage guarantee scheme can also offer a solution on the islands,” stated a release.
The NHG as it is implemented in the European Netherlands cannot be executed the same exact way locally. For example, there is no Credit Registration Bureau in the Caribbean Netherlands where banks can test the creditworthiness of customers.
On behalf of the BZK-ministry the “Waarborgfonds Eigen Woningen” (WEW) has drawn up a modified structure. To overcome the unfamiliarity with the housing markets in the Caribbean Netherlands and the possible additional risks to which the WEW is exposed, a number of measures have been taken:
– The experiment only applies to Bonaire for now;
– The product can only be offered by banks that are supervised by DNB;
– It concerns a maximum number of 350 guarantees for the entire period, with a maximum of 70 guarantees per year;
– The cost limit for Bonaire has been set at US $225,000.
– The duration of the guarantees covers a maximum of 30 years;
– The loan must be repaid in 30 years or less in an annuity or linear manner;
– Only people with a permanent employment contract may take out a mortgage with a mortgage guarantee;
– The experiment only applies to the acquisition of an existing home or new home to be constructed;
– As in the European Netherlands, a premium or security commission is used;
– The maximum loan amount is 100 per cent of the house value.
During the experiment, government can further investigate the possibility of a mortgage guarantee in the entire Caribbean Netherlands in a controlled and responsible manner.
The effects of the experiment will be monitored and evaluated in the coming years. It also examines whether a mortgage guarantee can be applied to Saba and St. Eustatius at a later stage.
Source: The Daily Herald https://www.thedailyherald.sx/islands/83279-mortgage-guarantee-pilot-soon-in-bonaire
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