FROM RESIDUAL DEBT TO CONVERSION

When forty-three years old Ellen and her husband have a house built, their marriage is on the rocks. They want to get rid of the building project as soon as possible and put half of the house for sale. That causes quite a few problems: a half-finished house doesn’t sell very well, so it stays on the market for years.

When they have finally sold it, a large amount of residual debt remains. The drama is complete when the tax authorities interfere. The tax inspector labels the house as a profit project, and demands the mortgage interest deduction back. Today she tells her story in the popular section And then the button went on.

How did you get into debt?

During my first relationship, we were building a house. When our relationship passed, the house was still under construction (hull). So we never lived in that new house. A house that is only half finished does not sell well. Therefore it took five years before we found a buyer. That offered far below the asking price. At that moment we decided to accept it anyway. We wanted to continue with our lives. We therefore accepted the remaining debt.

The tax did not help

Because we had never lived in the house, the tax authorities did not see this as a private building. For them it was a commercial project: building for sale with the idea of making a profit. If the divorce hadn’t come between them, we would really have gone and lived there. But because of the separation we had to stop the construction before it was habitable. That’s why we could never register there. And an entry in the basic administration at that address is necessary.

No matter how often we explained to the tax inspector that our intention was really to live in the house, he was inexorable. We had to repay the full mortgage interest deduction.

Where did you live after your divorce?

I first lived with my parents and then rented a small house. As soon as the rent became so high that it was better to take out a mortgage, I bought a house myself. And just six months later I met my current husband. You will always see.

And then you moved in with him?

No, certainly not. He also had a house for sale for five years. When he sold that, he also had a large residual debt.

How high was your total debt?

The remaining debt was over €50,000, so €25,000 per person. And the repayable mortgage interest deduction over those five years had risen to more than € 20,000. So that was also € 10,000 per person. So in total I had to pay € 35,000 for a house where I never lived.

Finally, I had a mortgage on my new house, and the remaining debt of my new husband came on top of that. That was a total of € 18,000.

What exactly happened that caused the button to go on?

So when my current husband and I met, we were heavily in debt. And that was a huge blow to us. We wanted to build something instead of just paying off debts. Especially because I didn’t feel I could do so much about it. It just felt very unfair.

My current husband therefore bought a new house after the sale of his house. We are completely refurbishing and expanding this house.

At the end of 2017 I sold my own house. And at the beginning of 2018 we got married, just back in community of goods so I am also entitled to half of the new home.

How did you handle it then?

First we paid off my debt. We repaid my husband’s remaining debt within 1 year.

How did you do that?

We first mapped the fixed costs to determine what remained. This allowed us to draw up a plan to pay off the debts as quickly as possible.

How did you deal with setbacks?

That is sometimes quite acidic. My husband had to pay a lot of costs to the lawyer because he had a difference of opinion with his ex about access arrangements with their child and about maintenance. These costs are often very disappointing. I also find unexpected costs for repairs to the car, for example, always annoying.

Did you get help? If so, from whom? Why? What with?

My father-in-law has helped us a lot by sponsoring something from time to time. We can also always go there to eat. And my mother-in-law often saves money for a shopping package and we get some from that. Furthermore, we do everything ourselves.

How is your situation now?

We now live in a rented house, because I have sold my house (for a profit!). This rented house is directly opposite our new home so we can carry out the renovation more easily. We have no travel time.

And with the surplus value from the sale we are now trying to finish the renovation. Hopefully we will succeed.

Can you be completely out of debt now?

Yes, except for a mortgage debt (for our new home) we are completely debt free. And for that mortgage I have now made a repayment plan to pay off extra every year.

Since we are still renovating, it may well be that I still have to borrow some money from my parents or the bank to buy solar panels or a heat pump. So it may well be that I still have to pay back a debt (for a short period of time). But it is really for something: to make sure that we can live in the new house.

Have you changed your behaviour and/or spending pattern since you are no longer in debt?

Yes, I only became more fanatical about cutting back. I get a lot of tips from blogs and websites.

Actually every penny goes towards the renovation of our new house. We expect that we will be able to live here at the end of 2018. Now we rent another house and we have double charges.

Do you sometimes do something nice then?

We regularly try to reward ourselves with something nice within the budget. Even if it’s just a nice sandwich or a bag of chips. If we now go to a birthday or party we appreciate this extra. We hardly go out for dinner. We try to make it as cosy as possible in the house with as little as possible.

Do you have tips for people who are still in debt?

Despite the fact that we have had quite a lot of (residual) debts, we have always come out of it so far by continuing to work hard and by spending as little as possible. We have really been living on the minimum for years. That shouldn’t be necessary at all with two wages.

My tip: read a lot about it, you can learn a lot from it. Moreover, you’ll notice that you’re not alone at all and there are people who (voluntarily or forced) cut back with you. That gives courage.

I can fully enjoy every success story in which I read that people have a wonderful life with few fixed costs. I hope to be able to be so far in five years that our house is completely finished and we have brought the mortgage debt well under €100,000 euros. Then I can work less, and really enjoy.