You already have a home, but this is due for a major refurbishment. The bathroom is outdated, you want an extension, preferably with the refurbishment you immediately take the kitchen with you and place solar panels on the roof. To finance this renovation, you need a large sum of money, which you may not immediately have at your disposal. You want to know what your options are: can you take out a second mortgage? You can read everything about a second mortgage in this article.
What is a second mortgage
There is a second mortgage if you take out an extra mortgage in addition to your current mortgage, with the same property as collateral. You can choose to take out the second mortgage with your current mortgage lender or with another lender. You do well to let you know in advance about the possibilities, interest rates etc. so that you choose the right mortgage lender. So ask advice from an independent mortgage advisor. The adviser can see if you can qualify for a second mortgage at all and where this can best be concluded.
What for a second mortgage?
The most common reason for applying for a second mortgage is to renovate the house or carry out maintenance. A new dormer window, expansion or, for example, energy-saving measures are required. That is also a reason why it is often decided at a later time to apply for an extra mortgage. Sometimes it is possible to obtain a second mortgage, otherwise you have to move to other solutions for the financing of your plans. A second mortgage is not the same as a mortgage for a second home. With a second mortgage, the house on which the first mortgage rests, as collateral.
The form of a second mortgage
If you want to take out a second mortgage, you can do so with an annuity or linear mortgage . When namely two mortgage closing with one of these mortgage and you thereby show that you are using the money to improve your home, then the rate of the second mortgage is also tax deductible. Are you using the second mortgage for other things such as a car or boat? Then the mortgage interest is not deductible from the tax.
Closing the second mortgage conditions
You can not just take out a second mortgage. Just as with the first mortgage, various factors are looked at to determine whether you can take out a second mortgage. These factors are:
- Your income
- The surplus value of the home
- The renovation plans, the type of renovation plans
- Your current mortgage
Calculate second mortgage
Calculating the maximum height of a second mortgage does not differ much from a calculation for a new mortgage.
Mortgage calculation based on income
For the second mortgage, it is checked whether you have enough income to also be able to pay this mortgage. The calculation on the basis of income is based on the following 5 components:
- Test income
- Key interest
- Housing ratio
- Maximum mortgage burden
- Current mortgage costs
The test income is your gross income. Do you pay alimony for your ex-partner? Then you must also get this from your gross income. Do you receive partner alimony? Then this is counted as income. For the gross income per year, the following points are taken into account:
- your gross annual salary
- irregularity allowance
- payment of overtime
- a 13th month
- year-end bonus
- holiday pay
- receiving partner alimony
- income as a freelancer
- a social benefit
- Reimbursement Extra seizure for military personnel in the service of Defense
If you have a partner, the lowest income is only partly included. Do you reach the pensionable age for 10 years? Then a lower income is taken into account.
If you are a self-employed person, the average income for the past 3 calendar years is taken into account. However, the last year is set as a maximum. So if you earned € 24,000 in 2013, € 28,000 in 2014 and € 23,000 in 2015, € 23,000 is the starting point. This also applies if you have a temporary contract. In addition, you also need a letter of intent from the employer. This statement states that your employer has the intention to retain you as an employee.
Because mortgage interest has an impact on the mortgage, this is taken into account when determining the mortgage. Do you want to take out a fixed-rate period of 10 years or longer? Then the actual mortgage interest is used to calculate the mortgage. Are you planning to fix the mortgage interest rate for less than 10 years, or not to secure it? Then the key interest is used. The level of this interest rate is determined by the regulator AFM. If the actual interest rate is higher than the key interest rate, the actual interest rate is maintained. Mortgage rates are often higher with a second mortgage than with a first mortgage.
Another name for the housing ratio is housing load percentage. The housing ratio is determined on the basis of the test income, the (test) interest rate and your age. A percentage of the gross income is used as the gross mortgage burden. The mortgage charge refers to the interest and the repayment of the mortgage.
Maximum mortgage burden
In order to calculate the mortgage, the mortgage burden is taken into account. This is calculated by multiplying the housing ratio by the previously determined test income. In addition, your expenses are looked at, such as the first mortgage, loans and ground lease. The higher these expenses are, the less you can get second mortgage.
The surplus value as condition second mortgage
A second mortgage is only provided if there is surplus value in the home. In case of surplus value, the house is worth more than the amount that is still open from the first mortgage. Imagine: you still have a mortgage of € 175,000 and the market value of the property is € 250,000. Then the surplus value is € 75,000. Because a second mortgage is more risky for the mortgage lender, it is being looked at more severely. Because if you can no longer pay the mortgages and the house has to be auctioned, the proceeds will be distributed among the creditors. The first mortgage is higher in the ranking than the second mortgage. Not all mortgage lenders want to offer a second mortgage. Often not because the first mortgage was not taken out with them. In addition, a higher interest rate is often calculated to cover the risk.
Type of renovation costs
The type of renovation costs also affects the level of the mortgage. For energy-saving measures such as solar panels or insulation, it is possible to borrow more than with other renovation costs, such as a new kitchen or extension.
You see, to calculate yourself whether you can get a second mortgage and how much you can borrow is pretty complicated. An independent mortgage advisor can help you find out whether you can get a second mortgage. This calculates for you how much you can get, discusses your wishes together and helps with the application.
Costs for a second mortgage
Taking out a second mortgage is not free of charge. For the second mortgage, as in the case of a new mortgage, various services must be paid for. If you seek advice from a mortgage advisor, you will pay consultancy and brokerage costs for this. The mortgage deed must then be drawn up and submitted to the land register. This is done by a civil-law notary, for which you pay notary fees. Since the costs of notaries vary considerably, it is wise to compare notaries. And because the mortgage lender wants to see that the property has surplus value, an appraisal report must be drawn up. That is cost item number three.
The building depot
With a renovation, the mortgage is deposited on a building depot. You can pay the invoices of the contractor from the building site. The money on the building depot must be used within 2 years.
Second mortgage benefits
The advantage of a second mortgage compared to a personal loan is that the interest rate is relatively lower for mortgages. In addition, the mortgage interest on a second mortgage is sometimes deductible from the tax. This applies if the second mortgage is used for refurbishment or improvement and is concluded in the form of an annuity mortgage or linear mortgage.
Disadvantages second mortgage
Taking a second mortgage costs money. Do you need mortgage advice? Then you pay advisory and brokerage costs for this. In addition, the new mortgage deed must be drawn up and the registration must be placed in the land register. This is covered by the notary fees. And as proof that there is surplus value, an appraisal report must be drawn up. Taxation costs are calculated for this.
Other possibilities to finance renovation
Can not take out a second mortgage? Then you have to move to another solution, for example by taking out a loan. Did you register a higher amount for the first mortgage than the mortgage amount? In that case, the notary has recorded a higher amount for the mortgage than that it actually borrowed. If the difference between the actual mortgage and the registered mortgage is large enough, you may be able to use this. In order to be able to include this part, the increase is assessed as a new mortgage.