Buying a house is a big step, especially if you are entering the housing market for the first time. For beginners, buying a home is often still a distant thought, partly because there are quite a few one-time costs involved in purchasing a home. It can also feel like giving up some of your freedom of movement when you buy. Yet you get a lot in return when you buy a house. We have listed the pros and cons to make weighing easier.
To buy or rent a house, what should I do?
The previous generations still say that buying a house is always brighter than renting because renting is a waste of money you will never get back.
Fortunately, nowadays, opinions are more divided because renting also has advantages. The average cost per household is higher when buying than when renting. You never get back these costs, such as taxes and duties. Costs that renters are exempt from. In addition, purchasing a house can get in the way of your flexibility. And flexibility is something today's first-time buyers need a lot regarding their career or living situation. After all, buying a house really is a good investment. After all, the costs you pay on your mortgage can be seen as filling your piggy bank.
The "starter's dilemma" causes many first-time home hunters to be unsure of what to base their choice on. Starters often experience this when they are first looking for a job after college or when they have to choose between buying or renting a home.
Renting or buying: what does it cost?
When buying a home, you are not done with the purchase price. There are also one-time costs when buying a home that you must consider. Take the "buyer's fee" (k.k.), the additional legal costs you must pay when you take over a house or costs for the appraisal report or a bank guarantee. The one-time costs when buying a home come out net at 5 to 6 percent of the purchase price.
Your basic monthly amount when buying a home is the cost of your mortgage; when renting a home, it is the rent. You also spend much of your disposable income on municipal housing costs: property tax, sewerage, and garbage collection. A distinction is made between single-person and multiple-person households; how many more people there are does not matter. There are fixed rates, except for property tax. That depends on the WOZ value of your home.
For a multiple-person owner-occupied household, the average municipal housing costs are €740 (after any tax credits), which is €67 higher than for a single-person owner-occupied household. For rental housing, single-person households pay an average of €290 and multi-person households €368. These amounts vary by municipality, with Bloemendaal being the most expensive municipality for both owner-occupied and rented homes.
Advantages of an owner-occupied house
- Mortgage interest deduction means homeowners can deduct the annual interest costs from their gross income. That's great because it reduces your taxable income, and you pay less net mortgage interest. You arrange the mortgage interest deduction annually in your income tax return. There is a big "BUT": the government is busy restricting the mortgage interest deduction. So in the coming years, this benefit will get smaller and smaller.
- One-off costs such as notary fees, appraisal costs or advice and mediation costs are tax deductible. Check carefully which costs are deductible in your situation.
- Creative freedom Building on, renovating or choosing your own kitchen; with a house for sale you can do much more. Provided you keep to the municipal rules.
- Building up equity You've probably heard this one before: "Buying a house is a (good) investment. Note: this only applies if you pay off your mortgage within thirty years or if you sell your home with a surplus value.
- Taking your mortgage with you Moving to the next house will affect your mortgage. Sometimes you can take your mortgage with you, which is especially lovely when you have agreed on a low-interest rate for a more extended period.
Disadvantages of an owner-occupied home
- Maintenance costs. The maintenance costs usually amount to 1% of the purchase price per year. This can be unpleasant, especially if you have taken the maximum mortgage. With a new home, this is a lot less. In the first five years, you will incur hardly any maintenance costs.
- Less flexibility You don't buy for a few years, you buy because you want to live somewhere for five to ten years. If you're going to move quickly, an owner-occupied house can affect your flexibility. After all, you have no control over how quickly your house sells.
- Insurances and taxes With an owner-occupied home, there are more expenses in the form of insurance and taxes, such as property taxes, building insurance, and municipal and water board levies.
- VvE By buying an apartment, you are automatically a member of the Owner's Association (VvE). The costs associated with this are for your account.
Risks of buying an apartment
- Fluctuating housing costs can change as interest rates rise or fall. The most significant factor here is your mortgage. If you have it fixed for a more extended period, you are less sensitive to fluctuations in interest rates. But, on the other hand, you will then pay a higher monthly interest rate than if you shorten your fixed-rate period.
- Risks "Nothing is certain, not even that. So keep in mind 'surprises' such as income risk, damage risk, and residual debt.
- Increase and decrease in value The investment in an owner-occupied home is helpful if the value increases. This can happen simply because of market forces but also because of a renovation, for example. On the other hand, your house can increase in value but also decrease. For instance, due to economic fluctuations. With Walter's valuation, you can check what your house is worth. This score takes into account trends in the market and is, therefore always up to date.
Advantages of renting
- Flexibility If you need a little more freedom, renting is an acceptable option because you can change houses quickly. In addition, you only have to consider a notice period (minimum one month, maximum three months).
- Maintenance costs are for the landlord You do not have to pay for structural defects in your home when renting; the landlord is responsible for them.
- Low insurance costs A rental property requires a lot less insurance. Insurances that do come in handy include household insurance, liability insurance, legal assistance, and rental guarantee.
- Little responsibility Most responsibilities lie with the owner of the property. Costs for and arranging any maintenance are up to them, and you don't have to attend association meetings either.
- Rental allowance Sounds good, such a contribution to rental costs. To qualify for a rent subsidy, however, you must meet several conditions.
Disadvantages of renting
- Deposit Before you move into a rental property, you must pay a deposit. Usually, this is one month's rent, but it can be higher.
- You accumulate nothing All the money you spend on renting your home is gone. When you pay off a mortgage, you are filling a piggy bank, and the home becomes yours after the mortgage is paid off.
- Renovating brings you nothing Only your landlord benefits. Because the house is not and will not be yours, you may wonder how much a renovation will benefit you.
- Original condition There is a good chance you will have to return your rental property to its original shape when you terminate the lease. Wear and tear usually does not require you to repair. Damage, on the other hand, does have to be paid for.
- Annual rent increases Landlords are allowed to raise rent once a year. The rent of your house was allowed to go up a maximum of 4.1-5.6% from July 1, 2019, this only applies to social housing. In the free sector, there is no maximum rent increase.
- Registration time social rental housing If you want to qualify, you must register with an organization responsible for distributing social rental housing. Beware: this takes a long, very long time. And the waiting times are increasing.
- High private rental prices Prices for rental housing are high because there is a massive shortage of houses available for free rent.
Risks of renting housing
- Rent Rights As a tenant, you are protected by the law from termination of rent by the landlord or owner. There are many conditions attached to this, though, and your landlord often has a longer leash.
Is it buying or renting?
Your disposable income when buying a house must be higher than for renting. In addition to your fixed monthly expenses, you need your own money to buy. How much money you need depends on your income, the region you want to buy in, and the number of square feet you want to buy. And while buying a house is a better investment, you must live there for five to 10 years to reap the benefits.
You can use the list above to weigh all the pros and cons. But will you be there? Maybe the offers, for both buying and renting, don't match your budget at all or what you need at the moment. And in your case, are there advantages? Think carefully about what suits your current situation.
Do you still have questions? Walter will happily help you make the best choice for your situation.
