Comparison of the US & Dutch Mortgage Markets
My wife and I on a boat tour of historic homes along the Vecht river, September 2025
My wife and I recently took a short trip to The Netherlands, where she is from. I took the opportunity to compare the US mortgage market and the Dutch mortgage market. The Netherlands has the fifth largest economy in the European Union.
Amount You Can Qualify For:
In the US, lenders individually decide how much a specific borrower can borrow. They do this according to their own self-created internal guidelines.
In The Netherlands, the government has legally established the mortgage amount a borrower can obtain—it is expressed as a fixed percentage of the person’s annual taxable income.
Regulation, Funding, Risk & Competition:
The US mortgage market is relatively free, with lenders being able to set their own lending requirements and as a result, more competition and variety of products in the market. The US has a uniquely large and active secondary mortgage market, which means that mortgages are resold to investors after they are created by banks and other entities. This provides money to create more mortgages. The risk of default ultimately lies with those final investors who hold the relevant mortgages long-term.
The Dutch mortgage market is highly regulated, resulting in less competition among lenders and less diversity of mortgage programs available to borrowers. Regulators seem to aim for a highly stable market rather than a competitive one. The market tends to be dominated by a few large banks who hold the mortgages in their portfolio (i.e. they do not resell them). Funding for new mortgages is obtained by bank-issues bonds which are backed by existing mortgages. The risk for default is born by lenders (the banks) themselves, as they hold the mortgages long-term.
Prepayment Penalties & Lender Recourse in Case of Default
In the US, prepayment penalties on a residential mortgage are rare and even illegal on the vast majority of loan products. In 12 US states (including California and Texas), there are mortgage programs available that significantly limit borrower liability in the case of default, i.e. if the borrower can no longer pay the mortgage, the lender can seize the home and sell it to try to recover the loan amount, but they cannot come after the borrower’s personal assets in case there is still a loss (i.e. if the sale of the home does not cover the full loan amount). In other states, lenders may also waive a borrower’s personal liability in certain cases where a home has to be sold for less than the loan amount, such as in cases of financial hardship. This is negotiated between borrowers and lenders on an individual basis.
In The Netherlands, prepayment penalties on fixed mortgage loans are common, with some of the exceptions being the sale of the property and the death of the borrower. Lenders have full recourse to the borrower’s personal assets in case of default; there are no non-recourse mortgage programs. It is extremely rare that lenders forgive mortgage debt, although they can offer options like forbearance, a longer-term payment plan or a loan modification. About 33% of Dutch mortgages are covered by a national mortgage insurance program called the National Mortgage Guarantee (NHG, “National Hypotheek Garantie”). if the default is caused by certain circumstances considered to be “beyond the borrower’s control,” such as losing one’s job, divorce, death of a partner or becoming disabled, the NHG pays the lender for any losses after the sale of the home, so that the borrower’s personal assets are not at risk. (This insurance is really for the lender, as the borrower still loses their home.)
Interest Rates & Downpayment:
In the US, the individual interest rate a borrower can get on their mortgage is to a large degree dependent on their credit score. The credit score system is a system of proprietary (i.e. confidential) scoring models first developed in the 1950s and used by US lenders to rapidly score borrowers in terms of projected profitability for the lender, based on generalized financial characteristics and borrowing history. The higher a borrower’s credit score, the lower interest rate someone can get. Lower interest rates are also available for certain categories of borrower, for example veterans and employees (vs self-employed borrowers). You can also reduce interest rates by putting down a large down payment, or by “buying down the rate” with a lender. This last option means that you pay the lender a specific sum upfront in exchange for a lower interest rate for the duration of the loan (according to specific option laid out in a table that the lender provides). Current US mortgage rates average about 6.3%. Historical average mortgage rates are about 7%.
With much stricter borrower requirements and national regulation of mortgage products, Dutch mortgage rates are lower than US mortgage rates, currently averaging about 3.6%. The concept of downpayment takes on a different character, since the government sets a cap on the loan amount based on taxable income. If you want to buy a more expensive house than this national limit allows, the rest effectively needs to be provided by you in cash and becomes the down payment. Rates are already very low, and I am currently unclear on if this form of higher down payment results in any significant further rate reduction.
Documentation Requirements for Self-Employed Borrowers:
In the US, self-borrowers need to have been in business for two years and, depending on the loan program, show tax return income for one or two years. Self-employed borrowers also have the option of qualifying through “alternative documentation” entirely, which means documentation of their creditworthiness other than tax returns. This can include bank statements showing the cash flow of the business, a certified profit & loss statement of the business from a CPA, and proof of total assets owned by the borrower. The “alt doc” mortgage programs have a slightly higher interest rates than tax return based programs.
For The Netherlands, it has been difficult to get exact information as online information about self-employed mortgage programs is inconsistent. However, in speaking to a number of Dutch people on the ground, it seems that self-employed borrowers need to show at least three years of tax returns in a self-employed capacity, and in addition to tax returns they need to show additional documentation proving the stability of their income. Additionally, the government-established loan amount limit is applicable to them (the loan amount is capped as a fixed percentage of their income as shown on their tax returns). For these reasons, it is considered to be “extremely difficult” to get a mortgage when self-employed, even when the borrower is making a very good income.
The Housing Market:
In the US, the upward trend of average home prices has been cooling, with home prices staying the same or going up only very slightly—although it does also depend on your specific local area. (Personally, in the daily work I do, I am seeing Southern California prices still on a slight uptrend while Florida prices have been definitely dropping). Nationwide, there is an estimated housing shortage of about 4.2 million homes on an overall population of 340 million. The US has a lot of land, with an average of 95 people per square mile. A recent Bank of America report stated that 52% of prospective home buyers are optimistic about the market.
In The Netherlands, home prices have been on a meteoric rise since 2023 and are expected to continue increasing into 2026. There is a severe housing shortage, with an estimate deficit of about 400,000 homes on a population of 18M. The Netherlands is already one of the most densely populated countries in the world, with a small land area inhabited by approx. 1400 people per square mile. I have not seen any official surveys, but our conversations with local people on our recent trip made it clear that the Dutch consider the overall situation dire, especially in urban areas.
Conclusion
The US and The Netherlands are countries with very different mortgage markets and two very different situations in terms of market size, population, land area and cultures. The US has a more dynamic, varied and competitive market, while the Dutch have a historically more stable market with lower interest rates for the average person (i.e. the employee borrower). Both markets suffer from a housing shortage that presents challenges for prospective home buyers, with The Netherlands currently experiencing a meteoric increase in home prices. When it comes to self-employed buyers, I think there is no question that the US market provides more options in terms of flexible mortgage programs and documentation, enabling American business owners to get more relative “bang for their buck” in the housing market.
