Dutch freelancers, self-employed face mortgage woes amid push to take salaried jobs
Dutch freelancers and self-employed individuals are increasingly concerned about the affordability of their mortgages as stricter enforcement by the national tax authority on bogus self-employment pushes many to consider salaried positions. For many, a regular job means a lower salary compared to their independent earnings, directly affecting disposable income and borrowing capacity, cautioned financial services provider Van Bruggen.
Jan Thale Haandrikman, director at Van Bruggen, told the Telegraaf on Thursday that "in many cases, the salary in employment is lower than the profit income as a self-employed person." With the push for enforcing rules at the Belastingdienst, the Dutch tax office, Haandrikman cited the example of a secretary swapping their freelance existence with an annual business income of 80,000 euros for an employment contract with an annual salary of 55,000 euros.
Such a change would then slash the individual's maximum borrowing capacity for a home by approximately 100,000 euros. The significant reduction "can mean the difference for many home seekers between being able to buy or not being able to buy in the current housing market," Haandrikman noted.
It can also be an unexpected shock for self-employed people who are active in sectors which were most heavily affected by the coronavirus pandemic and industry-wide shutdowns in 2020 and 2021, such as the hospitality, culture and events sectors. Mortgage lenders typically average the previous three years of a self-employed person's income to determine the maximum amount of financing available.
Many of those workers are just now in a position where they can borrow more money to purchase a residential property because the period reviewed by lenders no longer includes the most significant years from the pandemic. Additionally, hourly wages and day rates have been on the rise after inflation jumped dramatically.
"Our advisors notice that self-employed persons from these sectors will be more likely to qualify for a higher mortgage in 2025," Haandrikman told the newspaper. Switching to an employment contract would mean the lender would instead make decisions based on the terms of the worker's agreement with their employer.
"That has a direct impact on net disposable income," Haandrikman said. Depending on the situation, it can translate to a reduction in income, thus pulling down the amount available for a mortgage once they transition to a fixed-term employment contract.
Despite the potential financial drawbacks for mortgage applications, a move to salaried employment also offers benefits. Employees typically experience more stability during economic downturns, whereas freelancers often see an immediate decline in assignments. Additionally, mortgage providers often factor in disability insurance coverage for employees, a protection many self-employed individuals do not have.
Even with the Belastingdienst's expected increased scrutiny on bogus self-employment, Van Bruggen said that the number of mortgage applications from freelancers remains stable. Currently, roughly one in eight mortgage requests originates from a household with at least one self-employed person.
