Mortgage for entrepreneurs

A mortgage for entrepreneurs works similarly to a mortgage for individuals in the Netherlands, but there are some specific aspects entrepreneurs need to consider before obtaining a mortgage.

Income Verification for a Mortgage

One of the main challenges entrepreneurs face when applying for a mortgage is demonstrating stable and sufficient income. Unlike employees with a fixed salary, entrepreneurs often have variable income that depends on the performance of their business. Lenders want to make sure you can rely on a stable income stream.

Income verification for entrepreneurs in a mortgage includes the following documents:

• Tax Returns: Lenders typically request two to three years of personal and business tax returns to gain a comprehensive view of the entrepreneur's income and expenses over the specified period.
• Financial Statements: Entrepreneurs may need to submit profit and loss statements, balance sheets, and cash flow statements for their business. These financial statements offer insights into the company's financial health and revenue generation.
• Bank Statements: Personal and business bank statements are often required to validate the entrepreneur's cash flow and ensure consistent income deposits. A successful and profitable business can provide confidence in the entrepreneur's income stability.
• Business Registration Documents: Entrepreneurs may need to provide documents that verify the legal status of their business, such as business licenses or certificates of incorporation.
• Business Plan: In some cases, lenders may request a business plan that outlines the entrepreneur's future financial projections and growth strategies.
• Industry-Specific Documentation: Certain industries may require additional documents to support income claims. For example, freelance professionals might need contracts or rental income records.
• Credit Score and History: Lenders will not only verify the entrepreneur's credit score and history but also look at the business's credit record to understand the overall financial standing.

Independence Declaration for Entrepreneurs

An Independence Declaration for Entrepreneurs is a statement or document provided by the self-employed individual to assert their financial independence from the business entity. It is a form of self-certification used to demonstrate the entrepreneur's personal and business finances are separate for mortgage purposes.

When applying for a mortgage, entrepreneurs often face unique challenges in proving their income stability and creditworthiness. This declaration helps lenders understand that:

• The entrepreneur has been active for at least 12 months
• They have a stable income as an entrepreneur
• Their business can support personal financial obligations

Own Money and Loan-to-Value (LTV)

When taking out a mortgage for entrepreneurs, having your own money can be advantageous. It increases your chances of getting a mortgage and can lead to more favorable terms. Lenders appreciate personal funds that an entrepreneur contributes as a down payment when purchasing a property.

The amount of own money required can vary based on several factors, including:

• The entrepreneur's financial situation
• Business contribution
• Purchase price of the property
• Loan-to-Value (LTV) ratio

Generally, the higher the personal contribution, the more favorable the mortgage terms and potentially lower interest rates.

Loan-to-Value (LTV) Ratio for a Mortgage for Entrepreneurs

The Loan-to-Value (LTV) ratio is a crucial financial metric used by lenders to assess the risk of a mortgage. For entrepreneurs, this ratio might be slightly different compared to traditional employees.