Disability and Getting a Mortgage

The most important points at a glance

You naturally assume you'll stay healthy, but unfortunately that's not always something you can control. When taking out a mortgage, it's worth thinking ahead about the future and potential risks such as disability.

1. Taking out a mortgage when you're disabled

Even if you're disabled and want to apply for a mortgage, there are still options available.

The WAO

After the WAO (the old disability benefit act) was abolished, it was replaced by the WIA (Wet werk en inkomen naar arbeidsvermogen, the Work and Income according to Labour Capacity Act). Unlike the WAO, the WIA also allows for a partial disability declaration. This makes getting a mortgage with a WIA benefit a bit more complicated than it was under the WAO.

Whether you can take out a mortgage with a WIA benefit depends on the type of WIA benefit you receive:

IVA (Inkomensvoorziening Volledig Arbeidsongeschikten, income support for the fully disabled): mortgage possible
WGA (Werkhervatting Gedeeltelijk Arbeidsongeschikten, return to work for the partially disabled): mortgage not possible

The IVA

With an IVA benefit, it is possible to take out a mortgage, because you have been declared fully disabled. You cannot or can barely work, and there is little to no chance of recovery. You will likely receive this benefit until retirement age. Mortgage providers therefore regard this benefit as a reliable income.

The WGA

The WGA covers three different forms:

LGU (Loongerelateerde uitkering): an income-related benefit for partial disability with prospects of recovery.
LAU (Loonaanvullingsuitkering): once the LGU ends, you may receive the LAU or a VVU. With the LAU you work part of the time. The part of your income you miss due to illness is supplemented by the benefit.
VVU (Vervolguitkering): you receive this follow-up benefit only if the UWV (the Employee Insurance Agency) determines that due to illness you earn less than half of what you could earn if you were not partially disabled. The amount is based on the minimum wage and is therefore lower than the LAU.

Unlike with the IVA, it is not possible to take out a mortgage with a WGA benefit. Given the temporary nature of all three WGA forms, the benefit provides too little certainty for the bank that you'll be able to meet mortgage payments in the future.

2. Disability insurance

Becoming disabled during the term of your mortgage also has major consequences.

Covering a drop in income

Whether you're working less due to health issues, retiring, or choosing to cut back because you're having children, a possible drop in income is often already factored in when you take out a mortgage. In the case of health problems and especially permanent disability, however, the income drop is entirely beyond your control. Not only does your income fall, but your housing costs effectively become heavier. The lower income also reduces your tax benefit through mortgage interest deduction.

Taking out a housing cost insurance (woonlastenverzekering)

You can take out a woonlastenverzekering (housing cost insurance). With some mortgages this type of insurance is even mandatory. If your income drops due to unemployment or disability, the insurance pays out part of your monthly costs for a set period. This allows you to keep paying your housing costs.

Housing cost insurance at a glance:

Monthly premium.
Minimum number of working hours required (varies by insurer).
Health declaration required for disability coverage.
Maximum age at the start or end of the policy (varies by insurer).

An arbeidsongeschiktheidsverzekering (AOV, disability income insurance) lets you cover the financial consequences of disability. When you become disabled, the policy pays out a fixed amount for a set period or up to a certain age.

For entrepreneurs and freelancers (zzp'ers), it is particularly wise to take out a disability income insurance, because self-employed people no longer have a safety net since the abolition of the WAZ (the old self-employed disability insurance). You are only covered through the WIA if you are employed by an employer.

Disability income insurance at a glance:

Premiums are tax-deductible.
Benefits are not tax-deductible.
The benefit is a maximum of 80% of your last earned income.
In addition to disability, the policy can also cover the premiums for ongoing life insurance policies.
An 'excess period' (eigen risico termijn) is often mandatory, especially if you work in a high-risk profession. No benefit is paid out during this period.

The difference

The difference between the disability income insurance (AOV) and the housing cost insurance is that with the AOV you insure your income, while with the housing cost insurance you only insure your housing costs. This means the insured amount under the AOV is much higher than under the housing cost insurance.

Expert mortgage advice

Want to know more about your mortgage options? Request a free, no-obligation exploratory consultation with a mortgage advisor from HypotheekBerekenen.nl.