One way to finance a holiday home is by withdrawing excess value from your first home. Towards the end of your mortgage, your home will be (mostly) paid off and there is an opportunity to invest the surplus value in a holiday home. However, withdrawing the surplus value is not that easy. Nevertheless, there are several possibilities.

What is surplus value

Surplus value is the difference between the free market value of the house and the amount of the remaining mortgage debt, minus the selling costs. The tax term for excess value is ‘owner-occupied home reserve’.

Selling your house and buying a holiday home

The easiest way to take the surplus value is to sell your house and move into a rental property. Thanks to the surplus value, you will then have a nice savings pot. However, many people want to stay in their own home instead of moving. Moreover, it is not easy to find an affordable rental property.

A new, cheaper home

• You can also buy another, cheaper house than your current one and put the surplus value in it. You will then not get mortgage interest deduction for that part. An example:
• You sell your old house for 350,000 euros.
• The surplus value is 100,000 euros.
• The price of your new house is 200,000 euros.
• You may deduct mortgage interest on 200,000 euros purchase price – 100,000 euros surplus value = 100,000 euros
  Credit mortgage

A credit mortgage is a good solution for those who retire and continue to have sufficient income. This is because banks do not really take into account the (surplus) value of your paid-off home to determine the credit mortgage. They only look at your income and whether it is sufficient to continue paying the interest on your mortgage. Keep in mind that you cannot go to every bank for a credit mortgage.

Top-up mortgage

If you have less income (e.g. a small pension) and want to withdraw the surplus value of your home, then a top-up mortgage is ideal. The bank considers how much money you are allowed to withdraw – it can be up to 75% of the value of the home. The advantage of a top-up mortgage is that you get to continue living in your own home. Certain factors can shorten the duration of the mortgage. The top-up mortgage becomes worth less if the value of the home falls, interest rates rise or you yourself get older than expected.