If you have come to the Netherlands to work you probably start with a house to rent. When is it wise to take the step to buy ? And is buying better than renting? In this article we have put the advantages and disadvantages of buying versus renting.
Looking to the financial numbers buying gives you huge advantages because of the low rates, see for more information the last part of this article.
What are the advantages and disadvantages of buying and renting?
Buying a property
|In the long term it is usually cheaper to buy, because the monthly payments are often considerably lower than rent.
|Your are fully responsible for the maintenance of your home.
|Through house renovations you can customize the house to your needs.
|You have a big financial commitment.
|You are building an equity.
|Selling a house normally takes longer than the rent termination.
|You can make a profit if houses prices increase.
|You can make a lost if houses prices decrease.
Renting a property
|Contracts can be ended short, you are flexible.
|The rent price normally goes up every year.
|Repairs and maintenance are for the account of the landlord.
|You have no influence on the implementation and layout of the house.
|Tenants often receive extensive rent protection.
|You are only paying, you do not build up.
How is the situation between renting and buying financially?
For this we have an example of 2 people that bought an apartment.
Buying a 75m2 apartment
Mr. and Mrs. da Silva are living two years in the Netherlands. At the moment, they rent an apartment for € 1.750, – per month excluding water, gas and electricity. The house is in Amsterdam and 75m2 . They would like to live in the Netherlands the next 8 years. Therefore, they started looking to buy a house.
They have seen a apartment house for which the asking price is
€ 350.000, -. There is also a Company of Owners (VVE) contribution of € 125 per month.
For the purchase of the house, including additional costs, they need an amount of € 365.000.
They are allowed to finance € 353.500 for a mortgage. The interest is 2,0% per year and is fixed for 10 years. In 30 years the mortgage is fully paid off.
The monthly amount including interest and repayment is € 1.306. They receive each month € 150 back from the Belastingdienst as reimbursement of the paid mortgage interest.
The family da Silva would like to know if it is financially better for them to buy this house instead of the current rental house. Both houses are similar looking at m2 and location.
Expenses owner of a house
Interest and repayment mortgage € 1.306
Tax refund – € 150
Total mortgage expenses € 1.156
Water, gas and electricity € 150
Municipal charges € 60
House insurance € 20
VVE monthly amount € 125
Total additional costs € 355
Total expenses per month € 1.511
Expenses renting a house
Monthly rent € 1.750
Water, gas and electricity € 150
Total expenses per month € 1.900
The monthly savings are € 389. Over a period of 8 years this is € 37.344.
When the house is sold after 8 years the mortgage is € 278.877.
If the house will be sold for € 350.000 there is € 71.123 extra in your account.
Advantage of buying instead of renting after 8 years
Monthly savings € 37.344
Repayment mortgage € 71.123-
Total advantage € 108.467, –
Only when you are selling the house, you can calculate if you have had an advantage by buying a house. If the house drops in value for more than 31% then there will be no financial advantage in this situation between rent and sale in 8 years. However, looking at the current house market this is not likely.
In this example it is wise for the family da Silva to buy a house instead of renting. Given the huge financial advantage that they have in the period of 8 years, they have made a good investment by buying the house. By buying the house they also avoid annual rent increases.
Are you interested to buy a house in the Netherlands? Please contact us so we can advise you. We can guide you through the process of buying a house and arranging the mortgage.
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