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Do you have a home whose value has increased in recent years? Then you have excess value. This excess value offers various options for realizing your financial needs without having to sell your home. Incorporating excess value is not easy. In this article, we explain exactly what excess value is, how it occurs and how you can use it.
Overvalue occurs when the market value of your home exceeds the outstanding mortgage debt. For example, if your home is worth €300,000 and your mortgage debt is still €200,000, you have an excess value of €100,000.
Overvalue can occur in two ways:
• Increase in home value: The value of your home can increase due to various factors, such as a tight housing market, new construction projects in the neighborhood, or improvements and renovations to your home.
• Mortgage repayment: By paying extra money on your mortgage, the outstanding debt decreases. This ensures that your excess value increases.
You can use the excess value included for various purposes:
• Moving: The excess value on your current home gives you extra financial space when purchasing a new home. When you sell your home, an amount remains after paying off your mortgage. You can use this money to buy a more expensive home or to future-proof your new home. Maybe your excess value offers you the chance to finally buy that home you've been dreaming of for so long!
• Renovation/sustainability: Are you satisfied with your current home and have no plans to move? Then you can also use the excess value for a renovation. This way, you can adapt your home to live comfortably longer or make it more energy efficient. For example, additional insulation for more home comfort or creating a bedroom on the ground floor.
• Donation: Do your children have trouble buying their own home? With the excess value of your home, you can financially support them, for example through a donation or a loan. This way, you increase their chances of finding a suitable home. In addition, you can make a donation while alive, so you can see for yourself how they benefit.
• Supplement to your pension: Have you accrued little or no pension during your working life, but do you still want to enjoy your “old age” carefree? Then you can use the excess value of your home as extra income in addition to your state pension and/or pension. This gives you more financial space and freedom to fully enjoy your retirement years.
• Consumer use: In consumer use, you use the excess value of your home to purchase goods or experiences. Think, for example, of a new car, a boat or a caravan that you've been dreaming of for a long time. A special trip that has been on your bucket list for years can also become a reality. Keep in mind that a loan for consumer purposes is not tax deductible. However, this should not be a problem, as long as you think about this carefully beforehand.
Incorporating excess value involves financial liabilities. It is therefore important to carefully consider what you want to use the money for and what the consequences are for your monthly payments and your long-term financial situation. Always consult one of our financial advisors to discuss the pros and cons in your personal situation.
Do you want to know more about how you can use the excess value of your home and which option suits you best? Download our free white paper at this link.