Use the equity in your Dutch home to purchase real estate in Spain

Use the equity in your Dutch home to purchase real estate in Spain

In recent years, many Dutch homeowners have benefited from rising house prices. This increase in value has led to considerable equity in existing homes. For those who dream of a second home, a holiday home or a permanent move to sunny Spain, this equity offers a unique opportunity. In this blog, you will read how you can use your equity to realise real estate in Spain, which steps you should consider and which fiscal, financial and legal aspects play a role.

What do we mean by equity?

Equity is the difference between the current market value of your home and the remaining mortgage debt. This value usually arises gradually, but can also increase significantly due to market developments or home improvements.

Example: Suppose you bought a house ten years ago for €300,000. Due to price increases, your house is now worth €550,000. If your outstanding mortgage debt is still €200,000, you have equity of €350,000.

However, this equity remains “tied up” in the bricks and mortar of your home unless you take steps to use it for other purposes – such as purchasing a home in Spain.

Options to release the equity

There are several ways to use the equity in your home. The choice depends on your personal situation, financial possibilities and future plans. The most common options are:

• Re-borrowing or increasing your existing mortgage

If your income is sufficient, you can apply for a higher loan from your mortgage provider, whereby the additional borrowed amount is paid out as spending power. You keep your current home, while you use the surplus value as a means of financing your purchase in Spain. Take into account the bank's stated income and age criteria.

• Second mortgage or reverse mortgage

An alternative form is to take out a second mortgage on your home, also called a "consumption mortgage". In this case, (part of) the surplus value is released via a new loan with the home as collateral. This form is often used by the elderly, pensioners or people who do not want to sell their home but do want to use their equity.

• Sale of your current home

For those planning to emigrate or downsize, selling is the most direct way to cash in all of the equity. The net proceeds of the sale can then be used to purchase a home in Spain, possibly without additional financing.

Buying a property in Spain: points to consider

Spain is and remains an attractive destination for foreign buyers. The climate, the quality of life, the wide range of real estate and the favourable prices make the country very popular with Dutch investors. However, there are important differences compared to the Dutch market:

• Financing in Spain

It is possible to take out a Spanish mortgage, but this is usually only feasible up to a maximum of 70% of the property value. Stricter conditions apply to non-residents. A personal contribution – for example via the released equity – is therefore often necessary.

• Tax considerations

The interest on a mortgage in the Netherlands is only tax deductible if it is used for your own home in the Netherlands. If you use your equity for a home in Spain, this benefit will lapse. In addition, you must take into account Spanish taxes such as the transfer tax (Impuesto sobre Transmisiones Patrimoniales) and the annual property tax (IBI).

• Legal and practical aspects

The purchase procedures, contract forms and notarial obligations differ from the Netherlands. In Spain, for example, reservation contracts and down payments are used and the notary has a different – less advisory – role. Professional guidance is therefore very important to avoid risks.

Step-by-step plan for a responsible purchase using equity

1. Have your home appraised to determine its current market value.
2. Consult with a financial advisor about your options for refinancing or selling.
3. Determine your budget for the property in Spain, including additional costs (on average 10-15% of the purchase price).
4. Contact a specialist real estate agent with knowledge of the Spanish market and guidance in your own language.
5. Obtain legal advice on forms of ownership, tax consequences and inheritance implications.
6. Visit the regions that appeal to you and view properties with local guidance.
7. Only start the purchasing process after thoroughly checking all documents.

Conclusion: Equity as the key to your Spanish dream home

The equity you have built up on your home in the Netherlands can serve as a basis for an investment in Spanish real estate . Whether you are looking for a holiday home, a long-term return or a place to enjoy your retirement later, this step offers opportunities and requires a careful approach.

As an experienced real estate agent with an extensive network in Spain, we are happy to guide you through the entire process – from orientation to transfer.

Want to know more about your options?

Feel free to contact us for a free consultation with CasaLasDunas . Together we will look at which form of financing best suits your needs and we will guide you in every phase of your search for a home in Spain.

Tel. no.: +34 965 724 489 / Email: contact@casalasdunas.com