Additional credit regulation
Surplus value on your house is not just an amount of money that is released when you sell your house. Because the government tightened the rules for mortgage interest deduction in 2004, a number of restrictions have been imposed on the surplus value.
Several rules in this regard come together in the additional credit regulation. These rules have a lot of influence on the way in which you can deal with surplus value in the smartest way.
What is the additional credit regulation?
The additional credit regulation is called that because it determines how much you can borrow for a new home without the interest deduction of your mortgage being jeopardized. With the current appreciation of homes, you will likely deal with the additional credit regulation if you sell your old home and buy another one.
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The tax authorities will only give you an interest deduction if you invest the surplus value of your old home in a new home. Don’t you? Then the amount of equity will not be deductible in your new mortgage.
During a consultation with A&H Finance, our financial advisors will explain what this means in your situation.
Using the surplus value
When do the rules of the additional credit regulation apply?
When you plan a major renovation of your new home
If a new mortgage is taken out for the renovation, together with your advisor, you can determine whether you will pay part of the renovation costs yourself. This amount is then deducted from the surplus value, and, according to the additional credit regulation, you keep a larger amount of your mortgage interest deduction. Don’t have your own resources? Then, the new mortgage can finance the renovation.
When you move to a cheaper or more expensive home
Especially if you have plans to buy a cheaper home than your current home, it is important to be well informed about the consequences of the additional credit regulation.
You can see whether the additional credit regulation applies to you on the calculation tool of the Belastingdienst (only in Dutch).
A calculation example: Moving to a cheaper home
Your current home has a market value of €700,000, but your mortgage on this home is €300,000. You incurred €7,000 for the sale of the house (these costs may also be deducted from the sales price). Ultimately, there is € 393,000 in surplus value.
If you want to buy an apartment of € 300,000, the interest is not deductible if you want to finance the house. In addition, the remaining amount of € 93,000 will be classified by the tax authorities as additional credit regulation for three years.
If you are going to renovate the house or buy a new house within those three years, this amount will still be included in the home equity reserve.
A calculation example: Moving to a more expensive home
Your home has a market value of €300,000 and your mortgage is €150,000. The selling costs are € 7,000, so your home provides a surplus value of € 143,000. According to the additional loan scheme, this amount must be fully invested in the new home. Your new home costs € 500,000 (this is the purchase price of the home including transfer tax (for an existing home), any additional renovation work and financing costs). The new mortgage is only partially deductible if you do not contribute everything. Namely the difference between the purchase price and equity (€500,000 – €143,000 = €357,000).
The fact that you do not have a deduction on the entire mortgage of your new home is an important fact for a lender.
Home equity reserve
Surplus value that arises when you sell your current home is referred to as the home equity reserve. You can deduct costs that you incur for the sale of your home.
De Belastingdienst determines how much mortgage interest deduction you can still get for your new house via the home equity reserve.
Don’t want to invest surplus value in a new home?
Withdrawing surplus value and using it for expenses other than the home with a mortgage is usually allowed. Maybe you dream of a trip around the world or you want to make a pension provision with the money. The rules of the additional loan scheme do not force you to anything. Except perhaps that with a financial advisor you get a clear picture of the pros and cons in your situation and that you make a well-informed decision. A&H Finance is happy to help you with the best possible advice for your situation, contact us for an appointment.
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Call us on +31 (0)20-4651951 for a first introduction. Or fill in our contact form and we will contact you.