Buying a house vs renting one
Did the Netherlands become your home more than you consider your home country to be? We have some great news for you! Expats are allowed to buy property in the Netherlands. Whether you see yourself live in the Netherlands forever or you think about buying a house for a good investment. Let’s go through all the benefits of buying a house in the Netherlands.
This is why buying a house financially exceeds renting one by a mile.
How do the monthly mortgage payments and rental expenses stack up?
Let’s start by comparing monthly expenses. To do this, we will use an example of a typical 75m2 apartment in Amsterdam.
You can expect to pay around €1500 a month when renting an apartment of 75m2 in Amsterdam. If you would buy the exact same apartment you would have to pay about €500.000. You could fully finance this with an annuity mortgage with the interest fixed at 1,75% for 10 years. This would mean your gross monthly expenses are €1667, net €1567 (net = gross – tax rebate). This seems a bit higher than the monthly rent.
However, the monthly mortgage payment consists of two elements, the interest payment and loan repayment. The average gross monthly interest payment over the full course of the mortgage is €279. This amount is the amount you need to pay the bank for closing the loan. Meaning, you will never see this money again. The rest amount, the average loan repayment, is €1388 a month. After paying this month after month, in about 30 years, you will have paid off your full mortgage.
So, at first glance the total mortgage expenses seemed like they were a bit higher than the renting expenses. But if you compare the money that you are throwing away, the interest payment to renting expenses. This makes buying a much better investment than renting.
Also noted, when renting a property you can expect annual rental price increases due to inflation. Over time, this will make a big difference in the money you will lose. In case of a mortgage, yearly increases don’t exist. So you will never have to worry about inflation adjustments!
What happens when I move abroad?
Over time you might consider moving abroad after living in the Netherlands for 10 years. Considering the example above for the 75m2 apartment in Amsterdam, your remaining mortgage debt will be €353.670 (started at €500.000).
Disregarding any house price increases or decreases, you will receive €500.000. The remainder of the debt will go to your bank account: €500.000 – €353.670 = €146.300. A nice return. Do you need to pay tax over this? No!
When moving abroad, renting out your apartment is another option. With a normal mortgage, most banks won’t allow this, as it might lower the value and renters can gain certain rights.
In this case, you could switch your mortgage to a buy-to-let mortgage, which is designed for the renting purpose. The interest will be a little bit higher and one of the conditions is that you can only finance up to about 70% of the value. In this scenario, after 10 years, this is the case, so renting out your place could be an interesting investment.
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