Accessing or Calculating Your Home Equity

The key points in brief

The Dutch housing market has grown considerably in recent years, and many homeowners now have equity in their property. Here we explain what equity is, why you might want to access it, the different ways to do so, and the pros and cons of each method. We also share some tips and points to keep in mind if you are considering tapping into the equity in your home.

1. What is home equity?

Equity arises when the value of your home is higher than the outstanding mortgage on it. This can be the result of rising house prices, mortgage repayments, or a combination of both. The difference between the value of the home and the mortgage is called the equity (overwaarde).

2. Reasons to access your equity

Creating financial flexibility

Accessing your equity can provide extra financial breathing room, for example to pay for study costs, pay off debts, or fund a trip around the world.

Older homeowners and equity

For older homeowners, accessing equity can be a way to supplement their retirement income and live more comfortably during their pension years.

Investing in renovations or maintenance

Equity can be used to invest in renovations, maintenance, or energy-saving measures for the home, potentially increasing the property's value even further.

3. Ways to use your equity

Remortgaging

One way to release your equity is to remortgage. This means taking out a new mortgage for a higher amount than your current mortgage. The difference between the old and the new mortgage is the equity you release.

Second mortgage

Another option is to take out a second mortgage. This is an additional mortgage on top of your current one, with the equity in your home serving as collateral. This type of loan is typically used for home renovations or refurbishments.

Sale and leaseback

You can also release your equity by selling your home and renting it back. This is known as a sale and leaseback arrangement. You sell your home to an investor, who then rents it back to you. This way you can access the equity in your home without having to move.

Accessing equity without selling

There are also options for accessing equity without selling your home, such as an equity release mortgage (opeethypotheek) or a revolving credit mortgage (krediethypotheek). With an equity release mortgage, a loan is provided that you repay in monthly instalments, while with a revolving credit mortgage a credit limit is set within which you can freely draw down and repay. The equity release mortgage is similar to an interest-only mortgage, meaning you do not have to make capital repayments.

Personal loan secured on your home

Finally, you can take out a personal loan secured against your home. A loan is provided based on the equity in your property, which you can then use for a range of purposes.

4. Pros and cons

Advantages

• Extra financial flexibility for a variety of purposes.
• Ability to invest in home renovations or maintenance.
• Supplement to retirement income for older homeowners.

Disadvantages

• Higher monthly costs due to a larger mortgage or extra loan.
• Risk of residual debt if house prices fall.
• Possible negative consequences for your tax deductions or benefits.

Tips and points to consider

Financial advice
It is wise to seek financial advice before deciding to access the equity in your home. A financial adviser can help you make the right choice and inform you about the potential consequences for your financial situation.

Compare providers
If you decide to access your equity, it is important to compare different providers. Look at both the interest rate and the conditions of the loan to find the best deal.

Tax and regulations
Keep the tax rules and regulations in mind that apply to accessing equity. For example, doing so may affect your mortgage interest deduction or any benefits you are entitled to. It is important to inform yourself properly before making a decision.

Frequently asked questions

What is equity in your home?

Home equity arises when the value of your property is higher than the outstanding mortgage on it. This can be the result of rising house prices, mortgage repayments, or a combination of both. Curious about your equity? Calculate it for free on our website.

How does accessing equity work?

You can access equity in several ways, such as by remortgaging, taking out a second mortgage, sale and leaseback, accessing equity without selling (for example via an equity release or revolving credit mortgage), or a personal loan secured on your home. Curious about your equity? Calculate it for free on our website.

What can you do with equity?

You can use the equity in your home for a range of purposes, such as creating extra financial flexibility, investing in home renovations or maintenance, paying off debts, funding a trip around the world, or supplementing your retirement income. Curious about your equity? Calculate it for free on our website.

How much equity can I access?

The amount of equity you can access depends on the value of your home and the remaining mortgage debt. The conditions of your chosen method for accessing equity can also influence the maximum amount available. Curious about your equity? Calculate it for free on our website.