How to Make the Most of Excess Value In Your Home in the Netherlands

In today’s competitive housing market, many property owners in the Netherlands may find that they have an incredibly valuable, yet massively underutilized asset: excess value in their home, also known as home equity.

In cities such as Amsterdam, Rotterdam, Utrecht, and The Hague, house price appreciation has been steady for many years. Those who bought a house 10 years ago could be sitting on significant ‘bricks-and-mortar wealth.’

The question then is: how can you be a little smarter with your home equity when a move isn’t always an economically viable or attractive option? Release the equity from your home to renovate your house? How about helping your children get into the property market, or ensuring you have a retirement fund?

Here’s a guide on doing these things, with expert tips from professional mortgage advisors, M/V Works International, who specialize in assisting internationals with the Dutch housing and mortgage system.

Home Equity, What Is It Exactly??

What is a home equity? Think of it as the difference between the real market value and the amount still owed on a given mortgage. For example, if a home is worth €600,000 and there is a mortgage debt of €300,000, then your equity stands at €300,000.

Please note, however, that your house value is not what you think it is or what your neighbor sold theirs (similar to yours) for. Instead, it is what is provided by a certified appraiser or, in some cases, what the WOZ value states it to be. An expert can guide you through the process of assessing your home equity loan—like when you got the original mortgage.

Why Leverage Home Equity?

Now you know what is a home equity loan, here are some purposes for it:

1. To Future-Proof Your Home

More and more Dutch homeowners choose to renovate their homes rather than move to a larger house or relocate. This is especially relevant for people getting older. Adding a bedroom on the ground floor? Installing a walk-in shower, elevator, or wheelchair accessibility? Such renovations allow a person to stay in their current home for longer and add value to it without the stress of buying in a highly competitive market.

2. To Add Living Space

Whether installing dormers, enlarging the kitchen, or adding extensions, these improvements make the home feel new. They also add square metres. More space directly increases value. One thing about improvements, make sure they are genuine upgrades. If you have a lovely kitchen just not to your taste, it may not be worth spending the money, as it likely won’t be an upgrade.

3. To Improve Energy Efficiency

Sustainability is more than just a fashion statement – it is an investment. Enhancing an energy label B into A+ with solar panels, insulation, or a hybrid heat pump:

Lowers monthly gas and electricity bills
Enhances resale value
Might get you an interest rate discount from some banks

Even more interesting, some banks in the Netherlands even allow you to borrow up to €25,000 for energy-efficient renovations. This is irrespective of the income-to-loan ratio.

Helping the Kids Buy Their First Home

One of the most common uses of home equity is assisting your children in purchasing their first property.

The ‘Family Mortgage’ Model

Instead of giving a lump sum to the child, which could put it in the category of ‘gifts’ for taxation purposes, most Dutch parents prefer to become their child’s bank. You are, in essence, lending the money. They pay you back with interest. Provided it is properly structured, with help from a Notary, they then deduct that interest from their income tax.

What are the benefits?

The advantages speak for themselves. It keeps the money within the family, avoiding the hefty transfer tax (10.4%) that would be involved in buying a property by parents for children. It also helps prevent paying the ridiculous rents in the market. It is, however, important to pay attention to the tax arrangements. If the mortgage is partly a gift, the tax office (Belastingdienst) may reject those interest deductions.

Investing Abroad or In Lifestyle (or in a House in the Country of Origin)

With house prices high in the Dutch market, some therefore opt to unlock equity to invest in property abroad, such as in Spain or Dubai. That may mean:

A holiday home
A rental home for passive income
An alternative to another investment on a long-term basis

Others are using the funds to upgrade or refurbish a lifestyle component, such as a camper van, a boat, or a sabbatical. These are valid personal choices; however, M/V Works International advises that home equity be tapped only for well-thought-out and purposeful investment opportunities.

Read Also: 15 Silly Reasons Expats Don’t Buy a House in the Netherlands (and Why You Should Ignore Them)

When a Consumer Loan Might Be Better

If you only need a modest sum (€75,000 or less), a personal loan might actually be cheaper and easier than increasing your mortgage. Why?

Faster approval, however still plenty of info required
No property appraisal needed
Fixed term and monthly payments

However, the interest is typically higher, and it’s not tax-deductible unless used for home improvements. Always consult an advisor to compare your options.

Senior Mortgage: Extra Assistance With Special Mortgage Products

If you are over 62 and with a home full of equity, but with a very small pension, some special banks advertise special “senior mortgages.” Here, you borrow against your home, and pay no monthly installments. Interest accrues and gets capitalized into the mortgage amount. These allow you to make renovations or extract some income from the property without selling the home. Usually, the banks would only go to 70% Loan-to-value (LTV) to allow for long-term accumulation of interest.

Can I Have More Than One Mortgage?

Technically speaking, yes—but only if certain conditions are met. If your lender will allow it, you can get a second mortgage. Most other banks would rather sell a full loan under one roof. That’s because the first lender carries the mortgage rights, while other banks will be wary of taking secondary positions when times get hard.

It is usually easier (and cheaper) to refinance everything with another lender who can provide both better terms and some extra capital you need. The mortgage advisors at M/V Works International frequently engage in such switches, optimizing the process both efficiently and financially.

Tax Deductibility: What Qualifies?

Where a home equity loan is being applied toward renovations, the interest charge generally is tax-deductible on:

Kitchen renovation
Bathroom upgrade
Built-in closets or wood floors

However, if you use the money for furniture, a car, or a holiday, then, not surprisingly, you can’t deduct the interest. Be sure, of course, to check with your advisor to stay compliant with Dutch tax law.

Maintain a Healthy Financial Routine

Your finances should undergo an annual inspection. It is recommended that homeowners review their mortgage situation at least once a year. Why? Well, your house may be worth more, you may have paid down a chunk in your loan, or you may now be eligible for an interest-rate class level below the one you are currently paying, and hence it could lower your monthly payments. And no, before you ask, the bank is not going to keep you informed of this! It is up to you to take the initiative.

Use Your Equity Strategically

Equity in a home is an excellent leverage mechanism, yet it must be exercised with caution. It is a bad idea to use for high-risk investments and luxury expenses with no long-term value, and to make impulsive decisions without understanding tax consequences.

A far better idea is to improve your home to raise its value, help your children get a stable financial start, and investing in your health for accessibility and comfort as you age. M/V Works International specializes in assisting expats to maximize their Dutch home ownership opportunities and how to get a home equity loan. From refinancing to remodeling, or even planning your family’s future, they are your experts through the entire process. For a free initial consultation and an opportunity to discuss your options with an expert familiar with the Dutch system and your goals, contact M/V Works International.