Which is a better idea, buying or renting a house? There is actually something to be said for both options. Rents continue to rise, especially in the big cities. The prices of owner-occupied homes are also skyrocketing, and there are many extra costs involved. On the other hand, mortgage interest rates are historically low. We list the advantages and disadvantages of renting and buying.
Buy or rent: falling in love or a business decision?
When making a decision to buy or rent a home, there are many factors that come into play. Of course, for many people the emotion they feel about a particular home is decisive. Falling in love with a house can happen to anyone. There may be a number of rational considerations underlying the purchase or rental.
Renting: the pros and cons
Are you currently renting a house, are you in rooms or do you still live with your parents? Then it sometimes feels like everyone around you is going to buy a house, except you. One consolation: you are certainly not the only one with this problem.
Renting is often portrayed as a waste of money. Throw out the rent every month. Because yes, you could also invest that money in your own house. However, this ignores all the advantages that renting has.
The advantages of renting a house
Flexibility
- You can often cancel your lease at short notice. That means more flexibility, for example when you plan to work abroad. This makes it easier for you to move. That is different with a house for sale: it can sometimes take a long time before it is sold. Renting therefore also means freedom.
No problems with depreciation
- You are not dependent on the situation on the housing market. Is the value of your home falling? Then that is at most a problem for the landlord.
Rental Protection
- As a tenant you have legal protection of tenure: you cannot just be evicted from your house by the landlord. In some cases you are also entitled to rent protection.
No maintenance
- Is something broken in your rental home? In the case of major maintenance, this will be at the expense of the landlord. That saves you unexpected expenses.
Rental allowance
- As a tenant, you may be eligible for housing benefit under certain conditions. That saves you a lot in monthly costs.
The disadvantages of renting a house
Cannot be adjusted as desired
- You are often not allowed to adjust a rental property to your liking. Do you get permission from the landlord? In that case, you often do not get the investment back from your renovation. As a result, a tenant will also be less inclined to make this investment. The consequence of this is that a tenant has less enjoyment of living without noticing.
Rental increase
- Assume your rent will increase every year.
Long waiting times
- Due to the limited supply, there are often long waiting times for rental properties, especially in the large cities. If you are looking for social housing, you often have to be registered with a housing corporation for years to have a chance.
Deposit
- For private rent you often pay a deposit. You will only receive this back when you return the house in a tidy manner.
No wealth accumulation
- With a rental home, unlike with a house for sale, you do not build up equity. A buyer saves in the stones of the house.
Social rent or free sector?
You can rent in the Netherlands in the social or private sector. The difference between these 2 rental markets is the rent. Social rent and rents in the free sector are separated from each other by a so-called liberalization limit. This limit is re-established annually.
Is the initial rent of a home below this limit? Then it is social rent. If the rent is above this, the rental property is liberalized: it falls into the free sector.
This liberalization limit is also the limit that applies to the rent allowance. You are only eligible for housing benefit if you rent a house below the deregulation limit. Is your rent above that? Then you are not entitled to this, regardless of how much you earn.
Conditions of social rent
Do you want to be eligible for social housing from a housing association? Then you must meet a number of conditions. These conditions can be found via Rijksoverheid.nl.
- Register with the housing corporation
You must register with a housing association. Or at another organization that offers social rental housing. You can ask your municipality which organizations these are. - Apply for a housing permit
In some municipalities you need a housing permit. You can request this from your municipality. - Meet the housing association requirements
The housing association may impose requirements on the size of your family. Or the amount of your (joint) income.
Priority over social rental housing
On the basis of special circumstances, a housing association can give you priority over social housing. The municipality determines whether you are entitled to priority. You then request an emergency declaration from the municipality. In some municipalities this is called a priority declaration. Many municipalities have rules that determine whether you can get priority. These are in a housing regulation. If a municipality does not have these, the housing association itself can give priority to these rules.
If you rent from a private owner, he or she may also have all kinds of requirements to qualify for a private rental home. A (starting) real estate investor will want to know whether you are reliable and request information to determine your financial well-being. The person will want to limit the risks of investing in real estate by properly screening you as a tenant. In addition, the owner wants certainty in the event of financing the property, so that the charges in the form of the buy-to-let mortgage can be paid permanently.
Renting in the free sector
Do you not meet the conditions for social rent? Then you can search for a rental property in the free sector, also known as the private sector.
The name already says it a bit. Landlords of private rented homes have much more freedom to determine their rent: there is (for the time being) no maximum rent for homes in the private sector. This often results in high prices, especially in the large cities and around them. Is the demand high? Then rents in the free sector will rise accordingly.
Buying: the pros and cons
Do you think that buying is a better idea in your personal situation? We have also listed the pros and cons for this.
The advantages of buying a house
More enjoyable living
- Most homeowners enjoy their own home more than the average tenant. That’s because of a certain feeling. After all, it concerns a piece of ownership and there is often more willingness to invest in it to make certain improvements.
More homes to choose from
- Due to the scarcity on the rental market, there has been more freedom of choice in the owner-occupied market for years. There are simply far fewer rental properties available. The number of available rental houses is much smaller than the demand for rental housing. This makes finding a nice home much more difficult. Moreover, there are often long waiting lists.
Adjust to your own wishes
- As a home owner, you are largely free to decide how to organize your home. Renovation is therefore usually not an issue.
Stable monthly payments
- Your monthly mortgage payments have remained fairly stable over the years. Especially if you opt for a long fixed-interest period. Your mortgage payments are often also lower than what you would pay in rent.
You build wealth
- By paying off your mortgage every month, you build up equity. A buyer generally builds up this possession by paying off the loan and increasing the value of the home. At the end of the term of the mortgage, you have repaid the entire loan and the house is yours. And if the value of your house eventually rises, you can also earn from it when you sell it.
Low mortgage interest
- The mortgage interest rate is still very low. And if your mortgage is eligible for hypotheekrenteaftrek, the Tax and Customs Administration will pay part of your housing costs. Buying a home means a tax advantage. If the conditions are met, the mortgage interest can be deducted from the taxable income after deduction of the notional rental value. As a result, the total monthly costs of an owner-occupied home can be lower compared to a rental home.
Startup schemes
- As a buyer, you no longer have to pay transfer tax since 2021 (under certain conditions). In some municipalities, starters may also qualify for a starterslening.
Sustainable investment
- Are you going to make your home more sustainable? Then you will often also save on energy costs in the long run due to a lower energy bill.
The disadvantages of buying a house
Less moving house
- With an owner-occupied home, you have to arrange a lot more around your move. You may not sell your house as quickly as hoped, and you will lose money to, for example, a sales broker and a notary.
Temporarily double charges
- A buyer also incurs a so-called sequence risk. This can occur when first buying a new home as well as when first selling the owner-occupied home. The consequence of this is that there may be temporary double burdens surrounding a move. If the buyer has bought a new home, but has not yet sold the old one and therefore has the costs of two homes. On the other hand, the risk may also arise because the old home has already been sold, but the new home has not yet been completed or purchased. In the latter situation, costs will have to be incurred for temporary housing and possible storage of possessions.
Changing interest and charges
- Do you have a variable rate mortgage? Then your housing costs will change if the interest rate falls or rises. These changes are difficult to predict. Interest rate risk is an important factor, as a result of which the costs of an owner-occupied home can change. The costs of owning a home are a lot more erratic than the costs of a tenant. There are also various reasons for the burden risk. Not only an interest rate change, but also a change in tax regime and premiums or other costs can rise.
Cost maintenance
- Does something need to be renovated? Then as a homeowner you have to arrange this yourself.
Insurance and taxes
- As a homeowner, you must have a home insurance policy and sometimes also a life-risk insurance. And you have to pay annual taxes from your municipality and the water board.
Risk on residual debt
- Your house can fall in value or the yield can be lower than the mortgage on the house. This is an asset risk. Is your house worth less than your mortgage when you sell it? Then your house is ‘under water’. You will then be left with a residual debt.
Relocation costs
- Since 2018, you can still borrow a maximum of 100% of the home value. This means that you have to pay additional costs of the purchase yourself: the cost buyer (purchasing costs). For that you need a large bag of your own money. If there is an existing home, sales costs may also be involved. A buyer’s moving costs are significantly more than a tenant’s.
Buy or rent? In any case, get good advice!
Are you still unsure whether buying a home suits your personal situation? Please contact us. Together we discuss the options and discuss what will bring you more happiness.
