Home Renovation Financing in the Netherlands: A Guide for Expats
Whether you have just bought a property in the Netherlands or have been living in your home for several years, you may want to make some changes to suit your needs and preferences.
Perhaps you are thinking about installing a new kitchen or bathroom, adding a dormer window, or even carrying out a complete renovation. You might also want to make your home more energy-efficient by improving insulation, installing solar panels or replacing your heating system.
Whatever your plans, one important question is: how can you finance your home renovation in the Netherlands as an expat?
There are several options. Apart from using your personal savings, you can generally finance renovation costs through a mortgage or a personal loan. The best solution depends on your financial situation, the amount you need and whether you already own the property.
1. Financing a renovation with a mortgage
Using a mortgage to finance your renovation is often an attractive option, particularly for larger projects. There are two main situations to consider.
Situation 1: You are buying a property that needs renovation
Are you buying a house or apartment that you want to renovate straight away? In many cases, you can include the renovation costs in your mortgage.
Here is how it works:
Step 1: Prepare a renovation budget
Before the property is valued, you need to prepare a detailed overview of the planned renovation works and their estimated costs. This is often referred to as a renovation specification (verbouwingsspecificatie).
Step 2: Get the property valued
A certified property valuer (taxateur) assesses both the current market value of the property and its estimated value after the renovation.
In the Netherlands, a mortgage is generally limited to 100% of the property's market value. Additional borrowing may be possible for qualifying energy-saving measures, subject to specific rules.
Step 3: Arrange your mortgage and renovation deposit
Your mortgage will consist of two parts:
The amount needed to purchase the property.
A renovation deposit (bouwdepot) to cover the renovation costs.
The renovation deposit is an account managed by your mortgage lender. You can use it to pay invoices related to the agreed renovation works. Instead of receiving the entire amount in your bank account, you submit invoices to the lender, which then releases the funds from the deposit.
This allows you to finance the purchase and renovation together, rather than having to arrange separate financing afterwards.
Situation 2: You already own a property and want to renovate it
If you already own a home in the Netherlands and want to improve it, you can potentially increase your existing mortgage.
The principle is similar to financing a renovation when buying a property.
First, the property needs to be valued based on its expected market value after the renovation. Based on this valuation and your financial situation, it can be determined how much additional mortgage financing is possible.
There are generally two options:
Increase your existing mortgage: You arrange an additional mortgage with your current lender.
Remortgage with another lender: You transfer your existing mortgage to a different mortgage provider and potentially borrow an additional amount for the renovation.
In either case, the additional financing can be placed in a renovation deposit (bouwdepot), allowing you to pay renovation invoices from the available funds.
Important: Renovation costs do not automatically increase your property's value by the same amount
One thing to keep in mind is that the amount you spend on a renovation does not necessarily equal the increase in your property's market value.
For example, imagine you purchase a property for €400,000 and plan to spend €100,000 on renovations.
It does not automatically mean that your property will be worth €500,000 afterwards.
As a rough indication, around 70% of renovation costs may translate into additional property value, although this varies considerably depending on the type of renovation, the property and the local housing market.
In this example, the estimated value after renovation could be around €470,000.
This means you may need to contribute part of the renovation costs from your own savings, as the mortgage cannot necessarily cover the full amount.
2. Financing a renovation with a personal loan
A personal loan (persoonlijke lening) is another way to finance home improvements in the Netherlands.
The interest rate is generally higher than the interest rate on a mortgage. However, a personal loan can still be an attractive alternative, particularly for smaller renovations or when increasing your mortgage is not possible or practical.
In certain circumstances, the interest paid on a personal loan used for renovating your own home can also be tax-deductible. This is subject to conditions, including the requirement to repay the loan through an annuity or linear repayment schedule within 30 years.
There are four situations in which a personal loan may be worth considering.
1. You want to finance a relatively small renovation
If you already own your home and are planning a relatively small renovation, a personal loan may be more cost-effective.
As a general guideline, for renovation amounts below approximately €25,000, a personal loan can be an attractive option.
Although the interest rate is usually higher, you avoid the additional costs associated with increasing or refinancing your mortgage, such as mortgage advice, valuation and notary fees.
2. You need additional money during the renovation
Renovations do not always go according to plan. Unexpected costs can arise, materials may turn out to be more expensive than expected, or you may decide to add some extra improvements along the way.
If you have already arranged your renovation financing through a mortgage, increasing it again can be complicated and may involve additional costs.
An additional personal loan could provide a solution in this situation.
3. The property valuation is not high enough
Sometimes your renovation plans are limited by the property's market value.
As mortgage financing is restricted to 100% of the property's value, the valuation may prevent you from borrowing the full amount you need.
A personal loan could provide an alternative way to finance the remaining renovation costs, provided you meet the lender's affordability requirements.
4. Your income does not allow you to borrow more through a mortgage
Your maximum mortgage in the Netherlands is partly determined by your income and existing financial commitments.
You may already have reached your maximum mortgage based on your income, while still having renovation plans.
A personal loan could potentially offer an additional financing option. Mortgage affordability and personal loan affordability are assessed differently, meaning that it may still be possible to obtain a personal loan alongside your mortgage.
However, lenders will take your existing mortgage payments and other financial commitments into account when assessing your application.
Our advice: If you need both a mortgage and a personal loan, it is generally best to arrange the mortgage first and only apply for the personal loan afterwards. A personal loan can reduce your mortgage borrowing capacity, so arranging it in the wrong order could affect your mortgage application.
Personal loans for non-EU expats: What should you know?
If you are a non-EU national living in the Netherlands, there is an additional point to consider when applying for a personal loan.
Dutch lenders restrict the maximum repayment period of a personal loan to the expiry date of your residence permit.
For example, if your residence permit expires in two years, a lender may only be willing to offer you a loan with a maximum repayment period of two years. This can significantly affect the amount you can borrow and the monthly repayments.
Which renovation financing option is best for you?
Both a mortgage and a personal loan can be suitable ways to finance home improvements in the Netherlands.
The right choice depends on several factors:
The amount you need: A mortgage is often more attractive for larger renovation projects, while a personal loan can be suitable for smaller amounts.
Your available savings: Using your own funds can reduce the amount you need to borrow.
The value of your property: The expected market value after renovation can determine how much additional mortgage financing is available.
Your income: Your income and existing financial commitments affect how much you can borrow.
Your residence status: If you are a non-EU expat, your residence permit and the lender's acceptance criteria may influence your personal loan options.
Additional costs: Increasing or refinancing a mortgage can involve valuation, advice and notary fees.
Get advice on financing your renovation as an expat
Financing a home renovation in the Netherlands as an expat is certainly possible. Whether you want a new kitchen, a bigger bathroom, additional living space or a complete renovation, there are several ways to arrange the necessary financing.
At Kamp & Vulhop Financial Services (KVFD), we help Dutch and international clients understand their financing options. We look at your personal situation, income, residence status and renovation plans to find a suitable solution.
Would you like to know how much you can borrow for your renovation, or whether a mortgage or personal loan is the better option?
Contact us for personal advice. We are happy to help you find the right way to finance your home improvements in the Netherlands.
