What does negative equity mean, and what is a residual debt?

When does a residual debt arise?

Most residual debts arise from a forced sale, for example after a divorce, long-term disability, unemployment or a foreclosure sale by the bank. But it can happen with a voluntary sale too, especially if you have to move again shortly after buying, for work or health reasons, while the housing market has fallen in the meantime. What makes it doubly painful: on top of the residual debt itself, you also miss out on the home equity you would normally put into your next home.

Residual debt and taxes: is the interest deductible?

Interest on a residual debt is only tax-deductible if the debt arose between 29 October 2012 and 31 December 2017, and even then for a maximum of 15 years after the sale date. If your residual debt arose after 1 January 2018, the interest is no longer deductible in box 1, the part of the Dutch income tax system that covers income from work and your own home. It's one of those rules nobody is happy about, but you'll want to know it before you work out your monthly costs. When in doubt, always check the current rules on belastingdienst.nl, the website of the Dutch tax authority (Belastingdienst), because schemes like this do change from time to time.

NHG and the waiver scheme

If you took out your mortgage with the Dutch National Mortgage Guarantee (NHG), NHG can waive a residual debt after the sale, under certain conditions. Among other things, NHG assesses whether you acted 'in good faith' and cooperated fully in limiting the loss. Think of keeping up your mortgage payments, maintaining the home properly and engaging an estate agent to sell it for the best possible price. Those conditions matter: a residual debt is not waived automatically.

What can you do to prevent or resolve a residual debt?

If you're in negative equity, or close to it, there are usually several routes. Sometimes simply waiting to sell is enough: the housing market in Tilburg moves, and a few extra years can restore the balance between value and debt. You can also look at whether refinancing or making extra repayments is feasible, or at rolling the residual debt into a new mortgage if you do have to move. If you have NHG, always have someone check whether you qualify for the waiver scheme before you sell, because the conditions you have to meet during the sale process itself matter just as much as your situation afterwards. We're happy to work out what's realistic in your case.

Want to know where you stand?

A residual debt or a home in negative equity feels unpleasant, but you don't have to face it alone. At Belderbrandt in Tilburg we go through your situation with you, work out your options and explain which steps make sense, without any fuss. Feel free to get in touch, no obligation, on 06 52 69 88 22 or Martin@belderbrandt.nl and we'll set up an appointment.