Take out a second mortgage Most homeowners have ever taken out a mortgage to buy that house. If they need a large amount of money years later, their own home can be a source of that needed money. It could be money for a renovation. Or for a holiday home. Or a boat. With regard to the spending target, it must be kept in mind whether it concerns an expenditure on the owner-occupied home or not, because of the consequences for the interest deduction .
Overvalue We also call the withdrawal of an extra mortgage amount taking the money out of the bricks. This is only possible if there is equity in the home: if the house is worth more than there is still outstanding mortgage. If there is no equity, the intended expenditure will have to be financed in a different way.
Mortgage registration Many mortgages are 'registered higher' when they are taken out. This means that at the time the notary fixed a higher amount for the mortgage. Higher than the amount borrowed at that time. If the difference between the outstanding mortgage and the mortgage registration is large enough, a private mortgage increase may be possible. You do not have to go to the notary, which saves costs. Furthermore, the mortgage increase is simply assessed as a new mortgage.
Second mortgage If there is no room for a private increase in the mortgage, a second mortgage can offer a solution. Equity in the home is also necessary for this. The name says it all: the second mortgage comes after the first mortgage. And who knows, there will be a third mortgage afterwards? We are talking about the ranking of mortgages here. The ranking indicates which mortgage will be repaid first when the house is sold, which mortgage second, etc. A second mortgage therefore gives the lender less security than the first mortgage.
Second mortgage with another bank? Given the lower level of certainty, it is logical that not many banks are open to taking out a second mortgage if the first mortgage continues to run with another bank. The lenders who are open to it are subject to very strict conditions and a considerably higher mortgage interest.
No equity? Not all houses have equity. Without equity, it is not possible to withdraw an extra amount of money through a mortgage. If it concerns the financing of a renovation, then the mortgage may be based on the value after the renovation. However, the increase in value for renovation is usually not as high as the investment required.
Alternative: consumer credit If there is not enough value in the home, another solution is needed to get money. With sufficient income, a consumer credit is one of the options. A personal loan, for example, or a revolving credit . Taking out a consumer credit does not entail any costs, while for a second mortgage you will have to spend money on advice, appraisal and notary. The mortgage interest rate is lower than the loan interest rate , but in some cases the lower mortgage interest rate does not make up for the costs.
When making your choice, pay attention to the tax conditions for interest deduction when it concerns an expense on the owner-occupied home. The interest on a personal loan is tax deductible, but the interest on a revolving credit is not.