Renting or Buying?

Renting Vs. Buying a House in the Netherlands
As an expat, you might be inclined to rent a home. Renting often seems like the obvious choice if you’re living in a country that’s new to you. While renting gives you flexibility and perhaps less hassle, you’ll pay a higher price for it. Buying is an attractive alternative that can save you a lot of money. So should you rent or buy a home if you’re living in a new country? Let’s take a look at the pros and cons of each.

Pros and Cons of Renting
The greatest advantages of renting a home are flexibility and the lack of risk. You can come and go whenever you want, you’re not responsible for major maintenance, and you don’t have to worry about what would happen if your property value were to depreciate.

Of course, this comes with a price – literally. Renting in the free market is not cheap. Sometimes you pay several hundred euros per month more in comparison to an equal equipped home. You’ll find a comparison between renting or buying here. Other disadvantages of renting are that the choice is somewhat limited, the wait times can be long and rent increases each year. Above all, the rent you pay helps your landlord build equity in their investment and does nothing to help you grow your wealth.

Pros and Cons of Buying a House
Today’s market could be attractive for buyers. Both house prices and mortgage rates are relatively low. Buying a home can also be cost-effective in the following ways:

  • Mortgage interest is tax deductible
  • Your monthly mortgage payment can be fixed for a long period of time
  • Your payments and any property appreciation will build up your equity in the home, and the home will be yours when the loan is paid off

Buying also offers you the opportunity to find a property that’s exactly what you want. Buying offers you more choices and the opportunity to renovate your home any way you want. It’s important to keep in mind, however, that buying a house comes with some risk.

You can calculate your maximum mortgage here.

Risks of Buying a House

The greatest risk of buying is, of course, the risk that your value could decrease. In the Netherlands, you’ll be liable for repaying the mortgage no matter what happens to your property value. As long as you can pay your mortgage, you’ll be in good shape. But declining property values could pose a problem if you aren’t able to sell your home at a high enough price to pay off what you owe. In that case, you would be held responsible for any residual debt.

It’s important to keep in mind that the risk of residual debt is quite limited. Within five years of owning your home, you would already have paid off approximately 10% of the loan. So if the house price were to drop by 10%, you wouldn’t have any residual debt. And the money you monthly save by buying can be set aside as a buffer, limiting the risk even more. See our example calculations here.

National Mortgage Guarantee (“Nationale Hypotheek Garantie/NHG”)

Mortgages of up to 265,000 euros are eligible for the National Mortgage Guarantee (NHG). It’s a protection against residual debt that would occur if you had to sell your house because of problems beyond your control, like divorce, involuntary unemployment or the inability to work. This kind of protection will cost you 1% of the mortgage value but is earned back quickly; lenders offer much lower interest rates if you make use of this protection.

Hidden Defects

Buyers run the risk of buying a house with hidden defects. Fortunately for home buyers in the Netherlands, there are laws in place to protect buyers from unknowingly purchasing a property that has a lot of problems.

Sellers are required, by law, to notify you of any known defects such as leaking roofs, rotten floors or noisy neighbours. If the sellers don’t do this, they can be held responsible. You could go as far as dissolving the purchase agreement even after you bought and moved into the property.

However, buyers also have a duty to examine the property before purchasing it. In some cases, such as with old or suspicious properties, it may make sense for you to arrange a structural survey report. Such a report will cost you a few hundred euros. If the inspector finds any defects, you can renegotiate your purchase agreement or cancel the contract.

As you can see, the risks of buying a home are limited and the benefits attractive. Here are some example calculations so you can see the numbers for yourself.

The pros and cons of renting or buying on a row

Benefits of Renting

  • You can move at any time
  • The landlord is responsible for maintenance and insurance of the property
  • You don’t have to worry about losing money if house prices fall
  • You have a high level of rent protection
  • You don’t have to pay property tax (OZB)
  • You may receive a rent allowance if your income is low

Disadvantages of Renting

  • Rental prices are high
  • Your rent will increase every year
  • There is limited choice and long wait times in the current market
  • You won’t build equity with your monthly payments, and you won’t make money if property values rise
  • Your opportunities for renovation will be limited or non-existent
  • Any property improvements you do make will benefit your landlord, not you
  • When you move, you may have to return the property to its original state

Benefits of Buying

  • Mortgage and other housing costs are often less expensive than renting
  • Mortgage interest is tax deductible
  • You can have a fixed monthly mortgage payment
  • You build equity by making monthly payments, and the property will become yours once your mortgage is repaid.
  • You can profit from rising house prices
  • You can renovate the property however you want, and any renovations will benefit you
  • There are great purchase arrangements and subsidies available for buyers
  • There are more properties to choose from

Disadvantages of Buying

  • At the end of your interest-rate period, a new interest rate will be established, and this could change your monthly payment
  • You’re responsible for all repairs and maintenance
  • You may lose equity if property values decline
  • You’re required to pay property tax (OZB) and other communal taxes
  • You’re required to pay for homeowner’s insurance
  • Sales may take some time*

*Some sellers (mainly housing corporations) promise to buy back your home within 3 months

In general, renting is more flexible. It offers fewer commitments and less risk – but also fewer opportunities. Buying offers you more opportunities, is usually cheaper but also knows more obligations.

More housing/mortgage info:
How to buy a house in the Netherlands
How to get a Dutch mortgage
Calculate your maximum mortgage
What are the costs of buying a house?