How to increase your mortgage

Egle Kemezyte, from Mister Mortgage, overviews the primary reasons why people opt to increase their mortgages, highlighting the advantages and potential drawbacks of borrowing extra funds.

Imagine you're facing big expenses like buying a horse, financing a wedding, renovating your home or getting a car. These events can bring financial pressure, with sports horses costing €15.000 - €50.000 and weddings in the Netherlands averaging €15.000 - €60.000.

Relying only on savings for these expenses can stress you out. However, increasing your mortgage, or borrowing extra money against your current property, can offer a viable and reassuring alternative in such situations.

Popular reasons to increase the current mortgage

These are a few reasons why people increase their current mortgage plans:

Financing a holiday home

You can use the equity from your first home to help finance a second home by increasing your current mortgage. However, you must ensure you can afford the new monthly payments, which your mortgage provider will assess based on your income and assets.

Financing a second home to rent out

Many homeowners dream of purchasing a second property only for the purpose of renting it out to others. A rule of thumb is that investors can get a mortgage up to 70% loan-to-value (LtV). You can increase your current mortgage to buy an investment property if you have created equity while owning your first home.

Making sustainable home improvements and renovations

As a result of the recent energy crisis in the Netherlands, there's been a significant focus on energy labels and enhancing energy efficiency in the home. While greener home upgrades can be costly, increasing your mortgage is always an option for renovations or sustainability improvements.

Buying consumer goods

You can increase your current mortgage to finance a consumer good such as a wedding, a car, a boat, a holiday or even a horse. A consumer mortgage typically offers similar interest rates to a standard mortgage, making it a more appealing option than a personal loan. You cannot deduct the interest if you use some of your mortgage funds for this. Deductions are only allowed for the mortgage amount used to buy or improve your home.

What does it cost to increase a mortgage?

Increasing a mortgage hinges on several factors, but in practice, there are typically two main approaches to doing this:

• Choosing to increase your mortgage privately (if you already registered your mortgage at the notary) means you avoid notary fees but still incur costs for mortgage acquisition, such as advice and mediation. Additionally, a property revaluation is necessary.
• If you still need to register your initial mortgage for a higher amount, you must go through the process again, incurring notary costs. In this case, you need to pay these fees: valuation, notary, mortgage advice and handling fees, NHG fees, if applicable.

For more information, schedule an introductory call with a mortgage advisor who can help you to assess your situation.

Requirements for increasing a mortgage

To be able to increase your mortgage, you must meet the following conditions:

• You must have built home equity.
• You have yet to reach your maximum mortgage limit during the home purchase, leaving room for additional borrowing.
• Your income must be sufficient. Your mortgage provider assesses if you can afford the increased monthly payments based on your income, considering any existing debts.

As you can see, not just anyone can increase their mortgage. You have to meet certain criteria in order to be approved for it. 

Benefits of increasing your mortgage

Increasing your mortgage can have several advantages:

• Protect your savings and keeping them for other life events
• Qualifying for a tax refund if you increase your mortgage for renovation or sustainability purposes
• Access to extra funds

If one of these conditions sounds good for you and fits in with your current situation, then borrowing more might be right for you!

Disadvantages of increasing your mortgage

On the other hand, the disadvantages of increasing your mortgage are:

• Higher monthly costs and mortgage fees
• Incurring additional fees from your mortgage lender
• Higher mortgage rates 

Changes in the ratio between your mortgage amount and the market value of your home may result in your mortgage being placed in a higher rate class - which may not be ideal depending on your needs.

Increased mortgage and tax deductions

If you borrow money for renovations or sustainability improvements for your property, you may deduct the interest and costs from your taxable income under certain conditions. To qualify, you must demonstrate to the Dutch tax authorities (Belastingdienst) that the funds are used for renovation or sustainability reasons.

Further, you must meet additional criteria such as having the home as your principal residence, utilising an annuity or linear mortgage model, and adhering to a 30-year repayment plan. However, the interest is not deductible if the increased funds are used for other purposes.

Looking for expert guidance? Reach out to the specialists at Mister Mortgage. They are here to assist you in increasing your mortgage with personalised guidance every step of the way. With a commitment to transparency, integrity and growth, they're dedicated to helping you secure a bright financial future.