How to make your own home work for you when you retire


Expats home owners who have chosen to settle permanently in the Netherlands, or who have decided to retire here, are likely to have a considerable amount of capital tied up in their property.

House prices have soared in the Netherlands in recent years, and are now above their pre-financial crisis level. This means your home is likely to be worth considerably more than you paid for it, or than your current mortgage.

So, if you are thinking about retirement and living the good life, what can you do to make the most of the added value in your home?

It used to be in the Netherlands that you had no option other than to sell your home if you wanted to access the capital tied up in the property. But Dutch banks are coming to recognize that this is not an option for everyone.

One thing you can do to boost your retirement income is to take out a special sort of mortgage, which allows you to live in your home and enjoy a sum of money to top up your income.

In Dutch these new forms of financing are known as excess value, cash-in or even ‘eat up’ mortgages – all names which go some way to explaining how they work.

Of course, you can do more than just travel the world in an open-topped sports car with the money that these mortgages release.

Spend it on the kids

You could, for example, support your offspring by helping them buy a house or pay off their student loans, or carry out improvements to your own property to enable you to live independently for longer.

But you might just like to have extra cash around, because your retirement income will not be as much as you hoped it would.

It is worth noting that if you have not lived in the Netherlands for 50 years by the time you retire, you will not be eligible for a full state pension – which is currently some €1,400 a month for a couple.

In the Netherlands, you build up 2% of state pension (AOW) for every year you live here. So if you have been registered for, say, 30 years, by the time you reach the current the official retirement age of 66 years and four months, you will only get 60% of the state pension.

By the way, in case you were wondering, no other country in Europe has such a long residency requirement.

Things to think about

If you have a valuable property and want to continue living in it, it might be worth looking into releasing some of the capital. So what do you need to take into account?

Firstly, your property needs to have been well maintained and it needs to have excess value. Secondly, you need to decide how much money you want it to bring in – and whether this should be in the form of a lump sum or via a monthly payment.

And of course, you will have to continue paying off your original mortgage, if you still have one. The debt of the new ‘eat up’ mortgage will, in effect, be added to the first one and only has to be paid back once you, or your partner, die or sell up. All you pay extra is the interest.

There are, of course, some downsides to all this.

Firstly, if you decide later to downsize, you will have used some of the excess value in your home already, so you might have less to spend on a new property.

And, of course, your children will inherit less when you die, because you’ve been making the most of your money while you are alive.

But if you can see still see yourself cruising round Tuscany in a sports car or visiting palm-fringed tropical islands on a trip around the world, or even making your kids happy, it might just be worth thinking about.