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The Ministry of Interior and Kingdom Relations (BZK) starts sometime beginning 2019 with an experiment on mortgage guarantee on 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 administrative agreement Bonaire.
Several challenges regarding the financing of a owner-occupied home mean that few houses are sold within the Caribbean Netherlands. For example, banks generally finance up to 80% of the house value. As a result, potential home buyers must contribute a considerable amount of equity capital. In addition, the period of repayment runs up to a maximum of 65 years, 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.
The NHG as it is implemented in the European Netherlands cannot be implemented the same exact way. For example, there is no Credit Registration Bureau (BKR) in the Caribbean Netherlands where banks can test the creditworthiness of customers. On behalf of the Ministry of the Interior and Kingdom Relations, the Waarborgfonds Eigen Woningen (WEW) has drawn up an modified structure. In order 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 225,000 USD;
– 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 are allowed to 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% of the house value.
During the experiment, the government can further investigate the possibility of a mortgage guarantee in the 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.
RCN