An important change with regard to the tax-deductibility of residual debt financing with effect from 1-1-2018.
You can continue to finance your residual debt with the low-interest rates of a personal loan or revolving credit, but the interest costs are no longer tax-deductible, as was the case until December 31, 2017. This is a government decision.
Financing for their residual debt
In the past year, we had many customers who were looking for financing for their residual debt. Not surprising, because the GFI calculated that 1.5 million householders had mortgage debt in 2014 that was higher than the value of the home.
A home that is underwater so. “Can I finance my residual debt in my mortgage, to what extent is my residual debt deductible and what is the best way to repay the net asset value? “Just a few questions that I saw pass by. Time for a blog about the possibilities if your house is flooded.
Number of households with residual debt stabilizes
At the end of 2014, Statistics Netherlands brought good news. The number of houses with undervalue did not increase further.
With the economy slowly recovering and the housing market stabilizing, this trend is likely to continue. That is positive but does not apply directly to people who are currently left with a residual debt. The average residual debt is around USD 60,000, a substantial amount that can be a heavy burden.
Repay residual debt with savings
Have you sold your home with an undervalue? Then you must pay off your remaining debt. There are various possibilities. The best option is to pay off the remaining debt with savings.
It costs part of your savings, but you are released from the mortgage debt in one go. Moreover, the interest that you receive on your savings is much lower than the interest that you pay for a loan or mortgage.
Co-financing residual debt: mortgage or loan
If you do not have enough savings, you can opt for a mortgage or loan. In some cases, you can co-finance the remaining debt in the new mortgage. Your income and the value of your new home must allow this. Unfortunately, this is not the case in many cases.
A loan is therefore usually the best option. A loan is also cheaper because you do not pay appraisal, closing, notary and consultancy costs. Moreover, a loan is taken out faster and you can determine the duration of the loan yourself.
Residual debt deductible?
Yes, the interest you pay on your mortgage debt is deductible in the event of a lower value. This applies to both a loan and a mortgage. As of January 1, 2015, the remaining debt is deductible for 15 years. This was 10 years before this. Longer advantage so.
The last point I want to touch on is Good Finance. Do you have a residual debt because you had to sell your home due to, for example, divorce or dismissal?
Then it might be possible to pay off the debt with the help of the Home Ownership Guarantee Fund. In some cases, the debt is canceled. This only applies if you have a mortgage with Good Finance.