What can you do with the equity in your home?

That’s just great! The house that you have owned for several years has increased significantly in value. But in reality, you only notice that if you actually sell your house.

So how can you still make use of the equity in your home, allowing you to, for example, renovate, have some extra cash on hand, make a gift, or give your garden a thorough makeover?

We explain what the different options are and what conditions you need to meet.

Increasing your mortgage.

The easiest way to access the equity in your home is by increasing your mortgage. Increasing your mortgage privately is the cheapest option, as it doesn’t require a visit to the notary. But there must be room within your mortgage registration (setting a higher mortgage amount on the deed than was borrowed).

Gifting the equity.

You can, for example, use the equity for a gift or provide a loan to, for instance, your (grand)children.

In this way, you can assist them in purchasing their own home or funding their education. You increase your own mortgage, and that additional amount you either gift or lend to your son or daughter.

Would you like to know more about this? Discuss with a mortgage advisor from Nobel Mortgages whether this is possible for you.

Please note! In this case, the equity is not used for your own home. That’s why the interest on the mortgage is not tax deductible. So, you’ll be paying interest throughout the entire term of this new mortgage, and you’ll need to have paid off this mortgage after thirty years. This applies to any form of equity that is not reinvested in the house.

(More information: mortgage interest deduction conditions from the Tax Authorities)

Taking out a second mortgage.

If you don’t have room within your current mortgage, you can also take out a second mortgage.

In both cases, it’s possible to then access the equity. Your income will be reassessed, and your debts will be considered, just like when you first took out your mortgage.

Please note! You are only allowed to take out a second mortgage on your own home with the same bank where you have your first mortgage.

Good to know: If you want to use the equity in your home for a renovation and also want to make your home more sustainable right away… Or if you’re taking energy-saving measures? In that case, you can also use the equity in your mortgage to make your home more sustainable.

Please note! For financing energy-saving measures, you can borrow 6% on top of the home value.

Refinancing your mortgage.

Ending your current mortgage prematurely and taking out a new mortgage is called refinancing. To access your equity in this case, you take out a higher mortgage than your current debt. You can then withdraw the remaining amount. The same rules and exceptions apply as described above.

When mortgage rates are low, it may be more attractive to refinance instead of increasing your mortgage, despite the prepayment penalty you have to pay.

Taking out a reverse mortgage.

A reverse mortgage is a loan that allows you to receive payouts on the equity in your home. In a lump sum or in monthly installments. The borrowed amount and the accrued interest are then added to your mortgage. In essence, your home gradually becomes more owned by the bank and slightly less by you.

Especially for seniors with high equity combined with a low income, this is a popular way to supplement retirement income.

Unfortunately, only a few banks offer a reverse mortgage.

Taking out a home equity line of credit.

With a home equity line of credit (HELOC), you have a revolving credit with your house as collateral. You can flexibly withdraw money up to a certain agreed-upon limit. You can then repay this without penalty.

The interest rate is variable and often much higher than with a regular mortgage. Again, only a few banks offer this type of mortgage.

Taking out an equity release loan.

“The Housing Stimulus Fund Netherlands (SVN) offers the Equity Release Loan.” Specially designed for individuals aged 57 and above who wish to age in place in their own home. Deze lening mag alleen gebruikt worden voor verbouwingen om comfortabeler, duurzamer en veiliger te kunnen wonen en deze mag absoluut niet voor andere doeleinden gebruikt worden.

You don’t have to pay any interest or principal on the Equity Release Loan. The debt is only collected upon the sale of the property or after the death of the last surviving borrower.

Unfortunately, this loan is only available in a few municipalities.

Ground lease.

When the land is owned by someone other than the property on it, the resident often pays ground rent. This is not the most common way, but it is a possibility to unlock the equity.

You sell the land, receive the amount in your account, and then pay ground rent to the new owner of the land on which your house stands every month.

Selling your house and then renting it back.

This option may be interesting but not very common. You can sell your house and then rent it back yourself. In that case, you can not only access the equity, but also the entire value of your home.

Keep in mind that there may still be a remaining mortgage debt.

“There are also an increasing number of commercial entities offering a sale and leaseback arrangement.”

However, keep in mind that there may be a 20% lower sale value, not accounting for any bidding wars. Regularly selling and renting another home is financially much more attractive.

Nobel Mortgages

When taking out a regular mortgage, many banks offer roughly the same conditions. But when borrowing an additional amount that is not used for the primary residence, the maximum amount that can be borrowed and the conditions can vary significantly.

Do you want to know what is specifically possible for you? We’ll find out for you!

Because we at Nobel Mortgages are here to assist you by providing high-quality financial advice and thinking along with you in every aspect. We always go the extra mile for our (potential) clients, truly analyze all possibilities and, when necessary, always think outside the box. In this way, we ensure that we can achieve what others cannot. In other words, we are fully dedicated to helping you obtain the best mortgage or loan that suits you perfectly and, of course, aligns completely with your situation and preferences.

Do you also want an advisor who looks outside the box and really analyzes all the possibilities for you? Then contact our experienced and enthusiastic team soon.

We are available to you 24 hours a day with the utmost commitment and sincere attention. An e-mail is a snap to info@nobelhypotheken.nl or call or app to 06-54770122.