By opting for interest-only financing, it is still feasible in this period of higher interest rates to meet sustainability requirements and cover operating costs. In a market where interest rates are rising significantly and Dutch banks are becoming more selective, investors or developers can often be caught off guard. The assumption that a bank will automatically extend the loan is a thing of the past. This is due to upcoming Basel 4 regulations and the reduction of the financing book required by DNB (De Nederlandsche Bank) from Dutch banks.
Furthermore, interest rates at Dutch banks have risen substantially, and they are generally more expensive than foreign counterparts. Additionally, Dutch banks adhere to the requirement to make repayments, even if the Loan-to-Value (LTV) is 50% or less! The range of financing options in the Netherlands has never been greater. It’s worth considering foreign providers (banks, insurers, hedge funds, mezzanine or junior lenders) coming to the Netherlands right now. After all, Dutch real estate is a strong asset class, and debtors and regulations can be considered reliable.
Daan Reekers explains: “80% of the refinancing challenges we encounter in our practice are now financed in an alternative way or with foreign providers. Unfortunately, traditional Dutch major banks have no choice either. Due to strict regulations, not only the higher interest rate is now a bottleneck for many investors, but also adhering to the mandatory repayment requirement is a stumbling block. We have just witnessed a refinancing case in practice with an LTV of 46%, where the interest rate is nearly quadrupled to a total of 6.75% for 5 years. Additionally, this customer is obligated to repay 2%. You can imagine that this presents a lot of issues. Ultimately, we managed to place this financing with a foreign provider with a 50% LTV interest-only loan at a rate of Euribor + 1.75%! The customer could even opt for a 10-year rate at 5.95%!”
Diversity of various providers:
Fortunately, this scarcity also creates room for alternative funding streams in the market. There are more providers of crowdfunding and private loans, such as professionalized hedge funds, a lot of pension and insurance funds, and German banks entering the scene.
Unlocking Home Equity:
With foreign financiers, it is also easier to unlock potential home equity. “We don’t just finance with banking partners who need to consider RWA’s (Risk-Weighted Assets) and upcoming Basel 4 regulations. Especially with international pension or insurance funds, better and sharper rates with longer possibilities for legal durations of 7 to even >10 years are possible. There’s much more possibility than one might think, and the market is highly dynamic. As a debt broker, we’re engaged in the daily acquisition of funds, which also proves our added value,” Reekers explains.
Quality Data Makes Better Deals:
If you, as an investor or developer, want to be bankable abroad, you must ensure that you have good control over your data. Foreign financiers are accustomed to working with cash flow models, but above all, transparency in data. Reekers continues: “It’s about professionalism and being bankable for the debtor; now and in the future. The digitalization of financial processes is becoming increasingly important every day. Access to data and its quality matter more than ever. We live in a wide world with access to funds. As a real estate professional, you need to have your financial affairs in order professionally, and that’s where we assist our clients.”
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