Using your equity

If you have built up some equity on your current home, it might be interesting to use it for something else. Here we will discuss some of the options you have to use it to your advantage. Please take into account that a mortgage provider will not only look at the current value of your home but also at your current income situation to determine the amount.

For renovation

Have you been dreaming of a new kitchen or bathroom for years? Or is your house becoming too small and do you want to solve this with a rear extension or a dormer? If you cannot or do not want to use your savings, you can use your equity to increase the mortgage for renovating your home. This is also a good time to look into what works best for your present situation. It might be just to increase your current mortgage, or to transfer to a different lender all together.

For your next home

If you are going to buy a new home, you can use your equity to increase your reach on the housing market. You can even use it to buy a new house if you haven’t sold your current home. This is done with a so called bridging mortgage. A lender advances you the equity above the mortgage of your new home. A bridging mortgage is only available to you when you temporarily own two homes. You repay the bridging mortgage when you sell your current house.

Suppose your current home is worth €350,000 and the remaining amount of your mortgage is €200,000. In that case, your equity will be approximately $150,000 - $5,000 (sales costs) = $145,000. If your maximum mortgage were €250,000, you can use your equity to achieve a higher purchase price. If you have not yet sold your current home, the equity that you can bridge with most lenders is 90% of the value of your home minus the mortgage. So in this example 90% x €350,000 = €315,000 - €200,000 = €115,000 . So you can spend a maximum of €250,000 + €115,000 = €365,000 on your next purchase. Has your current home (on paper) already been sold? Then you can bridge the entire equity, allowing for an extra € 30,000. Make sure that you have enough savings on hand to temporarily pay two mortgages!

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For a second home

Would you like to buy your own holiday home, an apartment for your child or perhaps a house to rent out? Based on your equity, you can borrow extra money with your home as collateral. Unfortunately, this is not possible with every lender, so there is a chance that you will have to transfer your mortgage.

For more financial space

Have you been dreaming of a beautiful car or do you finally want to travel the world? Or do you want to increase your mortgage to give the money to your child? Even then you can borrow extra money based on your equity. In this case, too, this is not possible with every mortgage provider and you may have to transfer the mortgage to another lender.

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As extra income

It is also possible to use your equity as an extra income if you have or are almost retiring. If you can use the extra money, on a monthly basis or as a one time transfer, you can take out a loan based on your equity. The interest is paid from the loan, resulting in a higher mortgage and less equity. More and more mortgage providers are open to these kind of loans, which allow you an extra income based on your equity and not on your actual income.

Do you want to learn more about making the best use of your equity? A first orientation meeting at OHAO is always without obligation. Make an appointment with one of our mortgage advisors here.