House renovations in the Netherlands

How can you finance a home improvement project in the Netherlands?

In the Netherlands, homeowners looking to renovate their properties have several financing options, notably personal loans and mortgage-based financing.

A personal loan (persoonlijke lening) is a popular choice for smaller renovations due to its simplicity, fixed interest rates, and clear repayment schedule, typically spanning 5 to 10 years.

Unlike mortgage-based options, personal loans don’t require collateral, offering homeowners straightforward access to funds without involving their property directly. You can get a personal loan for home improvement from a trusted Dutch bank, like ABN AMRO.

For more extensive renovation projects, homeowners often turn to a bouwdepot, a dedicated renovation fund tied to a mortgage. Essentially, a bouwdepot holds your borrowed renovation budget separately, releasing funds incrementally as the renovation progresses and costs are invoiced.

How does a bouwdepot work?

When you want to renovate your home, it is possible to finance this renovation with a bouwdepot. A bouwdepot – or construction deposit – is essentially a home renovation loan from a mortgage company as part of your Dutch mortgage. This means that, in addition to borrowing money to purchase the property when buying a new home, part of the mortgage will be received later down the line if, for example, you want to build an extension or upgrade your kitchen — you don’t have to worry about taking out an additional renovation loan.

Additionally, it is possible to get an appraisal value based on the after-construction state of the property. This means it will be possible to get a mortgage of 100% of the market value after construction.

But although over 60% of the Dutch population have mortgages, there are many expats that don’t know about the bouwdepot.

Dutch banks, such as ABN AMRO, can offer you advice on how to add a bouwdepot to your mortgage.

This deposit is for when you receive invoices from a construction company. You must spend it within two years. A bouwdepot is not usually in cash — depending on your mortgage company’s procedures, you can either get reimbursements after paying the invoice yourself or you can declare the invoice and use the deposit money to pay the invoice.

An additional bonus to the bouwdepot is that you receive interest on it while it sits unused in the account. This offsets the interest on your mortgage repayments. Interest also accrues on money left on the bouwdepot during the first 18 months of its use.

What can you use a bouwdepot for?

You can use a construction deposit for construction and renovation work on your home. For example, it could be used to build an extension, to convert an area of your home (e.g., a loft), to refit or refurbish a room (e.g., a new bathroom), to replace fixed items (e.g., doors or windows), to cover decoration costs, or to carry out work on your garden. Funds are for materials and labor costs. Using the construction deposit for an electrician or a new floor tiling is fine; a new sofa or a shower curtain is not possible.

Plans are usually agreed with the mortgage adviser before purchase and are in an agreement along with cost estimates. It’s fine to deviate slightly from plans or spend a little bit under or over. However, large-scale changes are not possible.

How much can you borrow?

Your bouwdepot construction deposit can be for large or small renovations. Some mortgage companies may have a minimum threshold (e.g., €2,500). The maximum amount will depend on a few different factors:

• The mortgage you have. The construction deposit is part of your mortgage rather than being a separate loan. The maximum mortgage you can have in 2018 is 100% of your home’s market value.  This can be the market value after construction when the future construction is in the valuation report.
• The extent of the positive impact on the value of your property following the renovations.
• The maximum mortgage based on your income.
• How much you are financing the renovations out of own savings.

The steps necessary to arrange a bouwdepot

To take advantage of a convenient home renovation loan with a bouwdepot, follow these five simple steps.

First, speak to your mortgage adviser or bank. Do this during your mortgage application process, although some mortgage companies allow you to take out a bouwdepot as an increase on your mortgage post-purchase.

Second, specify what you want to use your construction deposit for and how much you intend to spend on each part of the renovation.

Third, when you want to activate your bouwdepot, notify your mortgage company.

Fourth, complete the renovation work.

Fifth, send the bills to your mortgage company (or pay and send invoices/receipts for reimbursements).

If you’re an expat looking to buy property in the Netherlands, it might be worth thinking ahead when it comes to financing home renovations and speaking to your mortgage adviser about a construction deposit. Many mortgage advisers specialize in helping internationals with financing.