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Frequently asked questions Caribbean Netherlands - Maximum lending

The frequently asked questions Caribbean Netherlands consist of two categories:

Frequently asked questions - Maximum lending

Someone asks for a mortgage and a personal loan at the same time. How should you calculate this?

If one and the same person applies for both a consumer loan and a mortgage at the same time, the lender must decide whether it is responsible to grant this loan. The AFM’s advice in such cases is to calculate one loan first and then include the monthly payments for this loan in the calculation for the second loan. It makes no difference whether the consumer loan or the mortgage is calculated first. The actual costs must always be included in the Model for maximum lending so that a proper calculation can be made of the maximum amount that can be lent.

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How do you issue a cash covered credit card?

With a cash covered credit card, an amount equal to the credit limit of the card is deposited in a blocked account. No calculation is needed for the credit limit prior to issuing a cash covered credit card. Payments made with the credit card are therefore always fully covered by the balance in the blocked account. Since the consumer can repay any debt on the credit card in full at any time, there is in principle no risk that the consumer cannot repay the amount borrowed.

The amount in the blocked account has to be the same as the credit limit
An important condition is that the amount in the blocked account must be at least as much as the credit limit of the credit card, and that the consumer is always free to repay their debt on the credit card with the balance in the blocked account in full without any penalty. Naturally, the other (statutory) regulations with respect to credit provision still apply.

When does a calculation of the maximum credit to be provided have to be made?
In case of credit cards that are not fully covered by a deposit in a blocked account, a calculation of the maximum credit to be provided does have to be made. The AFM’s advice is to base the calculation of the maximum appropriate credit limit for a credit card on a term of not more than 5 years.

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How should the maximum amount of credit be calculated with respect to a credit card?

At such time as a customer applies for a credit card and wishes to use this card to finance their spending, the limit on this card must be included as a financing expense in the calculation of the maximum amount of credit to be provided. The maximum term for this credit is 5 years. The AFM previously advised a term of 2 years. The reason for the change is that a 5-year term is normal practice in the market.

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How do I complete the model ‘maximum amount of credit to be provided’ if:

  1. I want to include overtime in the calculation of the maximum credit.
    A credit provider can apply its own policy with respect to deciding whether overtime should be counted when establishing the net income. The overtime however must be permanent. It must be shown that the income is ‘fixed and consistent’ (Section 7:17 Bfm BES).
  2. The actual housing costs are $0?
    If there are no housing costs, $0 should be entered in the model as the actual housing costs. For a single person living on Bonaire for example, the standard amount in 2017 is $689. The AFM expects there to be information in the file explaining how the housing costs are $0.
  3. The customer has a credit card?
    The AFM advises assuming a term for the credit card of up to five years. The calculation can be based on at least 5% of the maximum amount that can be withdrawn on the credit card. If the customer actually has a higher percentage to repay, obviously this higher percentage has to be used for the calculation.
  4. The type of household is not listed in the model?
    If the customer’s type of household is not listed in the model, you should enter the household type that most closely corresponds to the actual situation. If for example there is a household with two adults and four children, you should enter two adults and two children as the household type.
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As a provider of credit, may I use my own model to calculate how much credit can be provided to a consumer?

Yes, providers of credit may use their own models to calculate how much credit can be provided to a consumer. However, the credit provided must never be more than the result of the model for the ‘Calculation maximum amount responsible lending’ on the website of the AFM.

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Must all the figures in the model ‘Calculation maximum amount responsible lending' model be substantiated?

Yes, all figures entered in the model for calculating the maximum credit should be substantiated with evidence as much as possible. The client must demonstrate what his income and expenses for mortgage or rent are. This can be done, for example, with bank statements, a rental agreement/lease, a copy of the mortgage, a payslip, or an employer's statement.

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For the model used to calculate the maximum amount of responsible credit in the Caribbean Netherlands, what has to be entered for pre-existing monthly debt service payments?

Current financial expenses have to include the following:

  • The interest and principal payments that the consumer has to make each month for current consumer credit.  
  • Premiums for accrued benefit products. By an “accrued benefit product”, the AFM means a life-insurance policy under which a consumer builds up capital to fully or partially repay a loan at the end of its term.  
  • Premiums for term-life and other types of life insurance, if they are compulsory for obtaining a mortgage loan or consumer credit. 

Premiums for car insurance, fire insurance, home-contents insurance, etc. do not have to be included as pre-existing monthly debt service payments. To avoid double counting, this also applies to the premium for a compulsory term-life or other type of life insurance, if the premium is factored into the effective rate of interest.

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