According to figures from the CBS, half of the people over 65 who own their own home have a significant excess value. But what good is that if that money is stuck in your home and you have little space to do fun things? We'll tell you more about the opportunities to use your excess value as seniors.
There are various ways to use the excess value of your senior home. A common option is to absorb part of that excess value through financial products such as specific mortgages. You take out a new mortgage and receive an amount of it monthly or annually. You don't have to make monthly payments. You do pay interest, but it is added to the debt and only repaid when you sell your house.
Because you don't pay directly out of pocket, these types of financial structures are often seen as a way to use part of the value of your home.
These options are particularly attractive for people who have little or no supplementary pension, but who have a lot of excess value in their senior home. They do have wealth, but it's stuck in their home. The money will only be released when they sell their senior home. Because their income is often low, they cannot simply get an extra mortgage.
This applies, for example, to people who have been entrepreneurs and have not accrued a pension. They can then own a valuable home, but live each month on only a basic income. In such a case, using the excess value offers a good solution to still benefit from the accumulated capital. The money can be used to make the home more sustainable, fun activities, or to change things about the home so that they can stay comfortable there longer.
Helping children or grandchildren buy their own home? Then it is possible to help them with the excess value of your home. This can be done as a donation or loan. That way, they have a better chance of buying their dream home and you can make a donation so you can still enjoy what is being done with it.
Taking advantage of the excess value of your senior home can be a smart way to get more financial space, but there are also costs involved. One of the biggest barriers is closing costs.
You must take into account costs for a mortgage advisor, the notary, an architectural inspection and the valuation of the home. To determine the excess value, an appraisal is required. In some cases, this must be done via a full valuation report, but can sometimes also be done with a desk valuation. In total, the costs can reach thousands of euros before you actually get access to your excess value.
In addition, the interest rate is an important point to take into account. The interest rate for these types of financial products is often higher than with a regular mortgage. If you already have an existing mortgage, you may also have to refinance it, which can be unfavorable if your previous mortgage was taken out at a low interest rate. Due to rising interest rates in recent years, this has often become a difficult choice.
By using the excess value of your home, you remain the owner of your home. If you run out of money you have withdrawn through the mortgage, you will no longer receive monthly payments, but the mortgage will usually continue. You will continue to pay interest on the outstanding amount, and this interest will be added to the total debt. This can cause the debt to exceed the value of your home, especially if you live for a long time.
However, this does not mean that you will lose your home. There are no worries about forcibly selling your home, because most providers bear that risk themselves.
Using part of the value of your home does mean that there is less left for the heirs. That is why we recommend discussing with your family what the consequences may be, so that they do not face unexpected situations later.
Not all mortgage lenders offer the opportunity to use your excess value in this way. It's important to choose a reputable party when considering doing this. When taking out a mortgage to include your excess value, you also have to deal with obligations. The lender wants the value of the home to be maintained, which means that you must maintain the house properly and be adequately insured.
These financial structures are often suitable for people who have just retired, but as you get older, it can be more difficult to make use of them.
Are you curious about what is the best way for you to use your excess value? Please contact us using the contact form below. One of our advisors will then contact you as soon as possible. They are happy to think along with you and are ready to help you find the right solution so that you can take full advantage of the wealth in your senior home.
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