Can you buy something abroad with the surplus value of your house?
Imagine waking up in your own villa on the sunny coast of Spain, a vineyard in France, or a charming vacation home in the heart of Italy. For more and more Dutch people, this is no longer a distant dream, but an achievable reality thanks to the surplus value of their current home. But how do you make this dream come true? How can you use the surplus value of your house to buy a property abroad? In this blog, we take you on an extensive journey through the world of foreign real estate investments, financed with the surplus value of your house.
What is surplus value?
Surplus value is the difference between the current market value of your house and the remaining mortgage debt. Suppose your house is currently worth €400,000 and you have €200,000 left on your mortgage, then you have a surplus value of €200,000. You can use this surplus value to, for example, invest in a property abroad.
How can you use the surplus value?
There are several ways to use the surplus value of your house:
- Refinancing: This means increasing your current mortgage with the amount of the surplus value. You then get an additional loan on your existing mortgage, which you can use to purchase a property abroad. This can be attractive because you may be able to take advantage of favorable interest rates.
- Second mortgage: You can also take out a second mortgage. This is a separate loan in addition to your current mortgage, based on the surplus value of your property. This option can be beneficial if you do not want to adjust the monthly payments of your first mortgage.
- Sale with surplus value: If you decide to sell your house, you can use the surplus value directly to buy a property abroad. This offers the possibility to invest in your dream home without additional loans.
- Paying off the mortgage: If you have built up enough surplus value, you can consider paying off your mortgage in full. This gives you the freedom to take out a new mortgage for your property abroad without your current home serving as collateral.
How do you use your surplus value for buying a property abroad?
Using the surplus value of your house to buy a property abroad can be done in several ways:
- Withdrawing surplus value: You can withdraw the surplus value of your current home through refinancing or a second mortgage. You can then use this money as a down payment or full payment for a property abroad.
- Arranging financing: Besides withdrawing the surplus value, you can also consider financing part of the purchase price with a local mortgage in the country of purchase. This can often be more advantageous in terms of interest rates and conditions.
- Selling your current home: If you decide to sell your current home, you can use the full surplus value to purchase your new property abroad, possibly supplemented with a mortgage in the country of purchase.
Benefits of buying a property abroad with surplus value
Buying a property abroad with the surplus value of your house has several benefits:
- Financial flexibility: You don't have to dip into your savings and can still invest in real estate.
- Supplementary pension: A second home can serve as a valuable addition to your pension.
- Vacation home: You always have a place to go on vacations, without extra accommodation costs.
- Potential rental income: A property abroad can also be a source of extra income by renting it out when you are not using it.
What should you pay attention to?
When buying a property abroad, there are some important things to consider:
- Local legislation: The rules for buying a house differ per country. Make sure you are well informed about the local legislation and any restrictions.
- Costs and taxes: Besides the purchase price, there are other costs such as notary fees, taxes, and maintenance costs. Calculate these well in advance.
- Currency risk: The value of the euro compared to other currencies can fluctuate, which can affect your investment. Make sure you are aware of these risks and consider using currency options to protect yourself.
- Financing options: Research whether you can get a mortgage in the country where you want to buy a property. Sometimes this is more advantageous than refinancing in the Netherlands.
- Culture and customs: Each country has its own culture and customs. It is important to familiarize yourself with these so you know what to expect. This can vary from local negotiation practices to the way property is transferred.
- Rental possibilities: Research the local rental market and the potential rental income if you plan to rent out the property.
Differences between Spain, Portugal, France, Italy, and Croatia
Choosing a country to buy a property can depend on several factors. Here are some key differences:
- Spain: Popular due to the climate and relatively low real estate prices. Good infrastructure for foreigners who want to buy a house. Spanish banks often offer special mortgages for foreigners, which makes the financing process easier.
- Portugal: Known for its mild climate, especially in the Algarve. Often favorable tax benefits for foreigners. The purchase process is relatively straightforward, but it is important to obtain the correct permits and certificates.
- France: Particularly attractive to people who love culture and history. Property prices can vary, with higher prices in cities and popular regions like Provence. French legislation offers strong protection for buyers, which can be reassuring.
- Italy: Offers beautiful landscapes and rich culture. Real estate can be cheap in rural areas but more expensive in tourist hotspots. The purchase process can be complicated, so it is important to hire a local expert.
- Croatia: Emerging destination with beautiful coastlines and favorable prices. The regulations can sometimes be complicated for foreign buyers. It is advisable to hire a local lawyer to help you with the legal aspects.
Example: Buying a house in Spain
Let's take a look at a popular country among Dutch buyers: Spain. Here are some steps you should follow:
- Orientation and budget: Determine your budget based on the surplus value and other financial means. Then look for suitable regions and properties.
- Arranging financing: Contact a Dutch or Spanish bank to arrange financing. Many banks offer special mortgages for foreigners.
- Hiring a local real estate agent: A local real estate agent can help you find the right property and handle all legal matters.
- Purchase process: The purchase process in Spain is different from the Netherlands. Make sure you follow all steps carefully and have all necessary documents in order.
- Inspection and appraisal: Have the property inspected by a professional and ensure an accurate appraisal.
- Legal advice: It is advisable to hire a local lawyer specializing in real estate transactions to guide you through the process.
- Informing mortgage lenders: Not all mortgage lenders offer the option to use part of the mortgage for a property abroad. Inquire with different mortgage lenders about the possibilities and applicable conditions.
- Local taxes and regulations: Make sure you are well informed about local taxes and regulations related to the purchase of real estate. This can vary greatly by region.
- Contracts and insurances: Make sure to thoroughly review the contracts and take out the right insurances to protect yourself against unforeseen events.
Tips for investing in a property abroad
- Do thorough research: Gather as much information as possible about the region, the local real estate market, and the economic situation.
- Visit the location several times: Make sure you know the location well before making a final decision.
- Make a long-term plan: Consider how the investment in a property abroad fits into your long-term financial goals.
- Inquire with mortgage lenders: Not all mortgage lenders offer the option to use part of the mortgage for a property abroad. Inquire with different mortgage lenders about the possibilities and applicable conditions.
- Investigate rental possibilities: Research the local rental market and the potential rental income if you plan to rent out the property. This can be a stable source of extra income and help cover the purchase costs.
- Professional guidance: Engage professional guidance from real estate agents, notaries, and lawyers who have experience with buying real estate abroad.
Financing options in the Netherlands and abroad
- Mortgage in the Netherlands: Some Dutch banks offer the option to take out a mortgage for a property abroad. Inquire with your bank about the conditions and possibilities. These mortgages can often offer attractive interest rates, but they may also have stricter conditions.
- Mortgage abroad: In many countries, there are banks that offer special mortgages to foreigners. These mortgages can have more favorable conditions than Dutch mortgages. It is important to compare different options and carefully study the conditions.
- Loan on your current property: In the Netherlands, you can consider a second mortgage or refinancing to fund the purchase. This depends on the surplus value and the conditions of your current mortgage lender. Discuss these options with your mortgage advisor to determine the best strategy for your situation.
Conclusion
The surplus value of your house can be a great source of financial means to buy a second property abroad. It offers you the opportunity to invest in real estate without tapping into your savings. However, make sure you are well informed about local legislation and additional costs. With the right preparation, your dream of owning a property abroad can become a reality.
FAQ (Frequently asked Question)
Can I always use the surplus value of my house to buy a property abroad? Yes, but it depends on your financial situation and the conditions of your mortgage lender.
Are there risks associated with refinancing my house? Yes, your monthly payments may increase, and you may face currency risk with an investment abroad.
How do I find a reliable real estate agent abroad? Look for real estate agents with good reviews and ask for recommendations from other Dutch property buyers.
What extra costs are involved in buying a property abroad? Besides the purchase price, there are notary fees, taxes, maintenance costs, and possible real estate agent fees.
Is it wise to hire a lawyer when buying a property abroad? Yes, a local lawyer can help you navigate the legal aspects of the purchase.
Are there specific rules or restrictions when buying a house in Spain? Yes, Spain has specific rules and taxes that apply to the purchase of real estate by foreigners. It is important to be well informed.