Many starters on the housing market or people who are only looking for a house after a divorce wonder if they should rent or buy a house better. Both options have their own advantages and disadvantages: if you choose to buy, you build up your assets for later. But tenants are more flexible and you incur fewer financial obligations.
Rent or buy a house? – Cost
An important factor in the trade-off between buying or renting is in the costs. With a house to buy, you have already lost a considerable amount before you live there, such as the transfer tax, notary fees for the purchase and mortgage deed, advice and closing costs for the mortgage and possibly the application costs for NHG. You can finance these costs less and less in the mortgage, and from 2018 no more at all. You must be able to pay these costs if you want to buy.
In addition, you pay more tax than a tenant. In addition to the taxes that tenants also pay, such as the waste levy and the costs for the water board, buyers pay the notional rental value in box 1 and to the municipality. You must also take out a home insurance as a buyer. Finally, as a buyer, you are responsible for the maintenance of the property, while tenants may hire the landlord for this.
Buying or renting property? – Monthly charges and allowances
Then the monthly charges are important. For renters, the rent increases every year. The government sets the percentage by which the rent may rise annually. Moreover, if you earn more than the set limit, you will be faced with an income-dependent rent increase every year and your right to rent allowance will expire even earlier. In a rental home you know for sure that you pay more every year.
With a mortgage, your lunar costs are fixed for a number of years if you opt for a fixed-rate period. After this period you can agree on a new fixed-rate period, so that you know where you stand again for a number of years. It depends on the current interest rate at that moment whether this will turn out to be positive or negative. At the same time, with a mortgage that meets the conditions, you are entitled to a mortgage interest deduction, which means that you receive an amount back from the Tax Authorities every year.
Buying or renting a house? – Wishes and personal situation
But the choice between buying or renting does not only consist of a financial aspect. If you intend to live in the house for only a few years, a rental house suits you better. The costs that you incur during the purchase and for taking out the mortgage barely outweigh the advantage of a owner-occupied home. And if you are a handyman, a house for sale fits in better with your housing requirements. With a rental home you are very limited in the renovation possibilities.
Another advantage of the owner-occupied home is that you build up capital. Every month you pay off the mortgage, which means that an increasing part of the home value becomes your own money. You can then leave the house as assets to the children or use the house as a pension provision. But there is a risk that the property will fall in value, as a result of which you lose assets. Certainly if you are left with a residual debt, you have to sacrifice your assets considerably. You do not run this risk with a rental home.
Buying or renting? – Housing market
Finally, the housing market determines whether buying or renting is a better option. With a housing market where prices are low and rents are rising, buying quickly becomes a wise choice. Certainly if the mortgage interest rate is also low. But this situation sometimes scares potential buyers, because they are afraid that the value of the home will only continue to fall after the purchase and that a home is therefore a poor investment.
Tip! If you cannot make the right decision, a financial adviser can help you. He looks at your financial situation and your housing requirements and then advises on what you can do best.
In recent years, owner-occupied homes have fallen in value. Moreover, banks provided mortgages less quickly because more and more people had payment problems as a result of the crisis. But in mid-2013, the housing market began to stabilize. The housing market appears to be picking up again and interest rates are low. These conditions for home buyers are therefore improving.