Renting Vs Owning a house in the Netherlands
Renting a home is often seen as the obvious choice for expats. In a country where everything is new, it seems like the best choice as it gives flexibility and creates less hassle. Buying, on the other hand, could save you money. Whether renting or buying a home is the best choice for you depends on the pros and cons for your specific scenario. Let’s see what’s best for you.
What are the advantages of buying a house?
There is no greater freedom of choice and customisation than buying your own home. You can renovate, install that new kitchen, or choose a different colour of floor tiles. There are also a number of financial benefits.
- You are saving up capital by investing in the property you buy
- Your monthly expenses are fixed for the foreseeable future; no sudden price jumps
- Eventually, you will own your own house and significantly decrease monthly expenses
- Mortgage rates are currently not very high
- You can even deduct the mortgage interest from your taxes
Why is renting perhaps the better choice?
Fewer risks and greater flexibility are big advantages of renting. You’re not responsible for the upkeep of the house, have no worries about property values, and you can leave anytime you like. This comes with a cost, of course. Renting is more expensive in a free market economy and you might pay hundreds of euros more each month compared to a similar house if you buy it. You are also dependent on a more limited choice of places on offer, there might be a waitlist for the property you have your eye on, and the rent is likely to increase the following year. Mainly though, you are not building up any capital by renting and are, instead, enriching your landlord. On the other hand, he takes the risks from which you are safe.
Potential risks for buyers
Declining property values: Although you are building up equity, the value of a house is not guaranteed and could fall. If this happens, you will still be legally obliged to continue paying the mortgage, whatever happens to the house. If you are unable to keep paying the mortgage and have to sell your home for a lower price compared to the buying price, you could be left with a residual debt. Keep in mind though, that the risk of residual debt is relatively low in the Netherlands, and declining property values are unlikely to cost you more than the additional rent would have cost you in the end. It is always a good idea to keep some of your savings as a buffer in any case. However, the market is unlikely to change significantly in the upcoming years, and after five years you will already have paid off 10% of the loan. Even if the house value depreciates by that much, you will not be indebted.
Hidden Defects: If you buy a house, you always run the risk that there are leaking roofs or noisy neighbours that you knew nothing about. Please be aware that there are laws in the Netherlands that require the seller to notify you about such defects in advance. If they do not, they can be held responsible and the sales contract could even be cancelled after you’ve already moved in. On the other hand, as a buyer, your responsibility is to check the house before signing the deal. You can always request a structural survey report (at a cost of a few hundred euros) in the case of an old property or house of an unknown quality.
Unforeseen circumstances: You never know what can happen; you might lose your job or even the ability to work, you could get a divorce or, for some other reason, it might become impossible for you to continue living in your house. To prevent such circumstances from becoming a problem, you can opt for a National Mortgage Guarantee (Nationale Hypotheek Garantie, or NHG). If your mortgage does not exceed €290.000, this can be a protection against residual debt from circumstances beyond your control. The relatively low cost of 0.9% of the mortgage value is easily returned as lenders offer much better interest rates if you are thus protected. There are risks, but these are limited and buyers are well protected in the Netherlands. The benefits could be very attractive.
In short
The benefits of renting are as follows: no property taxes and no risk of depreciating property values, you can move on at any time, maintenance and upkeep of the home is not your responsibility, and you may even qualify for a rent allowance (low-income families). On the other hand, the disadvantages are mostly financial (higher monthly rates which are increasing each year, and all of it goes to the landlord instead of your equity). You have more limited choices for homes and may have to wait a long time for the right place, in which you can then not do any renovations.
Buying also has its own set of advantages and disadvantages. Benefits include financial incentives; lower monthly costs which are fixed for a long time, and a mortgage that is tax deductible. You are building up equity and have a larger choice of properties, which you can renovate however you want to. Again, there is another side of the coin; the disadvantages include (limited) risks of property devaluation, some additional costs such as property tax and homeowner’s insurance, and you are, of course, responsible for the maintenance and repairs of your own home. Selling your home may take some time.
In the end, it comes down to the flexibility of renting, with fewer risks and responsibilities, against the opportunities and obligations of buying.
