By increasing the existing mortgage you can free up money for, among other things, a renovation. Private or second mortgage? These are the costs and options in 2019.
Increasing the mortgage is often used to finance a renovation. In this way homeowners can free money from the home without selling it. If the home value is higher than the mortgage (surplus value), additional mortgage is possible.
Increase the mortgage: private or second mortgage?
To increase the mortgage, you can opt for a private increase or a second mortgage.
- Private mortgage increase: For this, the mortgage registration at the Land Registry must be higher than the current mortgage. You then consciously registered the mortgage higher or you repaid it. Within that space you can privately increase the mortgage.
- Increase mortgage with second mortgage: If your current registration does not offer extra space, you can increase the mortgage by taking out a new mortgage in addition to your existing mortgage.
Standards for increasing mortgage in 2019
Every increase in the mortgage is viewed by the lender as a new mortgage. This must therefore be checked against the currently applicable mortgage standards. This means that the increased mortgage must fit within the income standards. Calculate what you can borrow on the basis of your income.
In 2019 you may not borrow more than the home is worth. Fortunately, the average house price has risen in recent years, as can be seen on the map shown. This may create more room to increase the mortgage. If you increase the mortgage for taking energy-saving measures, you may borrow a maximum of 106% of the home value.
Consequences for the mortgage interest deduction
If you increase the mortgage for the renovation or improvement of your home, the mortgage interest on the increase is also tax deductible under certain conditions. A condition for the mortgage interest deduction is that the extra amount is repaid for 30 years and at least in the annuity. This is what the tax authorities say about it.
Costs for increasing the mortgage
In addition, the property must be re-evaluated and you must go to the notary. A notary is only required for a second mortgage. If you stay within the registration, you save on notary fees. Because of these costs, raising a mortgage is interesting for a loan from € 25,000. From that loan amount, the lower interest rate on a mortgage outweighs the costs. With a lower mortgage amount, the financing methods below may be cheaper.
Other financing methods
There are a number of alternatives to raising the mortgage that may be more beneficial.
- Savings: Due to the low interest rates currently available, it can be advantageous to use your savings.
- Consumer credit: With a low loan amount (up to € 25,000) it is cheaper to take out a personal loan or a renovation loan. You then pay no costs for advice, valuation and notary. In addition, the interest on a consumer credit is tax deductible if you adhere to the above conditions.
When raising, also consider resizing
It is interesting to increase the mortgage, in combination with the mortgage refinancing. In addition to increasing the mortgage, you then opt for the lowest mortgage interest in the market and conditions that match your current situation. This is a bit more work than just raising the mortgage, but your mortgage is therefore completely up-to-date again.