What can you do with your home’s surplus value?
Do you own your own home? Then chances are it has become worth more since you bought it. The difference between the sale value of your home and the mortgage debt is called excess value. And you can do something beautiful with that!
Consider, for example:
- Remodeling or insulating your home,
- A nice extra for your retirement,
- Buying a second home (such as a vacation home),
- Making a big expense, such as a car or a nice trip,
- Supporting your children with an endowment.
Whatever you plan: it always starts with a good overview of your money matters.
How can you use your surplus value?
There are several ways to release money from your home. These are the most frequently chosen options:
1. Increasing your mortgage
If you have enough income, you can raise your existing mortgage. Often up to 100 percent of the current value of your home.
2. Taking out a second mortgage
Is raising not an option? Then you can take out a second loan. That runs separately from your first mortgage.
3. Redeeming Mortgage
A cash-out mortgage is especially suitable if you are older. You won’t have to pay anything back as long as you continue to live in your home. Interest is added to the debt.
4. Mortgage transfer
When you refinance your mortgage, you pay off the old mortgage and enter into a new one. The new mortgage then has different – often better – terms. But note that there are additional costs involved.
5. Moving to another purchase home
When you sell your home, the excess value is released. You can use those for your next home. Note that the IRS is watching to see if you actually do.
6. Moving to a rental property
Are you selling your home and renting? Then you can use your excess value as you see fit.
What should you pay attention to?
Top-up scheme:
If you don’t use the excess value for your next purchase home, you may not be allowed to deduct all of the interest on your new mortgage.
Income check:
Most options look at your income – except for the cash-out mortgage.
