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Rent or buy?

When it comes to renting versus buying a house, there is always an interesting debate about which option makes the most financial sense. And to be honest, both sides do have valid points. The most common argument for buying: why pay a monthly rent to your landlord instead of building equity in a home for yourself? On the other hand, there are many reasons, financial and others, why renting may be more attractive and financially more sound.

One of the main financial reasons is that the true cost of homeownership is probably much higher than many people interested in buying a house anticipate. When it comes to calculating the true cost of homeownership, you need to have a complete view of all of the related expenses. At first glance, a mortgage payment (partly tax deductible) might be less than your current monthly rent. But do note that the mortgage is only part of your total cost of homeownership. The extra taxes, insurances and other fees might increase your costs of homeownership with an extra 15 to 20% in addition to the monthly mortgage payments. So as we say in Dutch, it is important to compare apples with apples and not apples with pears.

We also wish it were true that buying a home always makes more sense than renting. Our answer based on more than 45 years of experience: it does not always make sense! Our rule of thumb, only consider buying a house if you have the intention of living in it for a long time. If you buy a house for a shorter period, you run the risk of not earning back all the fees, taxes and costs you face when buying a house. Of course, there is no guarantee that you will always make money, but the risk of being left with a debt decreases considerably over time. And in contradiction to what many people believe, paying rent is not a waste of money. True, your monthly rent does not flow back into your own pockets, but you are getting something very valuable in return: a home to live in. When you buy a house, you will also be spending a lot of money every month on interest payments, taxes and other fees. This is also a lot of money that you will never see again.

OK, we have warned you for the downside risks. But, why is it a good reason to buy a house in the Netherlands?

  • It can be a smart investment. Housing prices have risen considerably over the past few years. This is no guarantee that the prices will continue to rise.
  • Owning a property comes with tax benefits. The mortgage payments are (partly) tax deductible.
  • Rents tend to rise every year. As a home owner you are exempt from that.
  • Rents have no end and go on for ever. As a home owner you will probably have repaid your mortgage debt after 30 years.
  • As in any country, owning your own house gives you a sense of stability and security.

Calculating whether it makes more sense to rent or buy is not just a rational game of numbers. Buying a house can be an emotional rollercoaster. It will definitely be one of the biggest financial decisions you will ever have to take in your life. Let a professional help you with that and do not embark on this adventure on your own.