The mortgage guarantee scheme is open to abuse. You could divorce your debt, says Annemarie van Gaal.

The Netherlands has a safety net for every eventuality. Safety nets are fine for those who really need them but in a gullible country like ours they can become a considerable burden if abused.

Our benefits system, for instance, became a problem when the Bulgarians discovered just how ‘user friendly ’it was.

Mortgage guarantee

I am a financial mentor in a new television programme called Divorce Hotel. When we recorded the show I was confronted with a number of safety nets open to abuse. Take the National Mortgage Guarantee scheme (NGH). In the last couple of years 80% of homes were sold under the scheme. It’s an insurance against residual debt in case something goes wrong in your life. If you lose your job and end up with a residual debt the guarantee will cover it.

Isn’t that great? The NGH is a government scheme so we all pay the residual debt. Karel Schiffer, who heads the scheme, thinks this is a good thing: ‘If we didn’t have this guarantee in place many households would be struggling with towering debts for years and years.’

Struggle

Time for some facts. According to the Dutch central bank, 1.3 million homes have negative equity. Suppose you and your spouse chose to share and share alike and bought a house for €200,000 six years ago. You took out an interest-free mortgage for €240,000, because you could and because it would give you a little extra to play around with.  

You have lived very pleasantly over the last few years on this borrowed money but the value of your house has gone down to €160,000. Were you to sell your house now your residual debt would be €80,000.

You could, of course, continue to struggle and make good on the loss by making your payments on time. You could also do it by getting a divorce.

Warning

Yes, a divorce. Neither of you can pay the mortgage and so the NGH – that’s us – coughs up. There you have it: a divorce to get rid of residual debt. And of course the divorce wouldn’t have to be final. Perhaps after three months you decide to get married all over again. There’s nothing to stop you.

The number of homeowners whose residual debt is being paid by the NGH as a result of divorce is four times as high as the number of people who default on their mortgage payment through loss of a job. I’m not saying people are already abusing the scheme. I’m only warning the NGH that it is vulnerable to abuse.

Annemarie van Gaal is head of publishing company AM Media and a writer and columnist.