Why should you consider buying a home in the Netherlands

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You’ve been living in the Netherlands for a few years now and you have started to think long term. How about buying a property in the Netherlands? It sounds simple, but it is not an easy decision to make! But it can be beneficial to you. Let me explain how.

Renting vs buying: For most of us expats, in the beginning renting is an obvious choice. But a question you need to ask yourself is: How long do you intend to stay in the Netherlands? If the answer is anything more than 3 years, then you should consider buying instead of renting. Let’s take a layman’s example: For an 70 m2 apartment outside the city center (centrum), you typically pay a rent between 1000 Euros to 1500 Euros per month (sorry, need to exclude you Amsterdam as you are too expensive for this example) depending on the city you live in. Best case scenario, 1000 Euros per month, that is a whopping 36,000 Euros for 3 years – this is money you are throwing-away – you will never get this money back. On the other hand, if you buy the same apartment worth about 350,000 Euros (again, you won’t get it for this price in Amsterdam, but in a smaller city perhaps), you would pay a monthly amount to the bank (via a mortgage). And guess what, the monthly amount will look very similar to your monthly rent and in many cases, even cheaper than your monthly rent. There are different types of mortgages available, but in most cases, your monthly amount will have a principal component and an interest component. The interest component is the throw-away part but the principal component is actually your investment. You will get this back in the form of your house in a few years. While you are still paying the 36,000 Euros out of your pocket in a period of 3 years, only the interest component of this is throw-away and the rest is yours. Oh, another thing – the interest is tax deductible, so you get back some money from the belastingdienst (Dutch tax authority). Yippie! 😊

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Now, let’s say you want to move out of the Netherlands (why-o-why do you want to do that!!! but anyways…..) after 3 years of buying your house. Don’t worry, you have options – you can either rent it out (if you have an outstanding mortgage, you need permission from your bank) or sell it. If the housing market has crashed and your apartment is worth only 330,000 Euros now (worst case scenario) and you still have an outstanding mortgage of 314,000 Euros (350,000 minus 36,000) with the bank. When you sell the apartment, the bank takes the outstanding balance (314,000 Euros) and gives you the rest 16,000 Euros (330,000 minus 314,000). So, you would have paid a net amount of 20,000 Euros over a period of 3 years (36,000 minus 16,000). Despite the market crash, this is still better than the 36,000 Euros you would have thrown-away in case of renting! I have not elaborated on other scenarios like renting it out and I don’t have to show you the numbers if the house prices have appreciated – it will only be more beneficial to you!

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Phew!!! We did some number crunching, but in the end, even a market crash did not impact you so badly… so that’s a relief indeed. I am not a finance guy, so the example taken here is a simple one with a worst-case scenario. If you look at the actual mortgage formulae, the calculations are more complex, but the idea is the same! I have excluded Amsterdam for this example, but the calculations will look similar even for Amsterdam (just append an extra zero to every number you see here 😉)

If you have read the article till here, I am convinced that you are convinced to buy instead of rent 😊

If you need more reasons to buy, here are a couple:

  1. All-time low interest rates – the mortgage interest rates are going down and down and down and doooooown. They are in search of that zero, I guess!
  2. If you are turning 35 in 2021 or later, this is for you 😊. Overdrachtsbelasting is the transfer tax that you as a buyer pay when you purchase an existing property (bestaande woning). Current situation is that you pay 2% of the purchase price. Starting 2021, this will be zero for first-time buyers under the age of 35. The Dutch government wants to encourage young first-time buyers. This can be a substantial saving. You can read all about it here (in Dutch). Overdrachtsbelasting is not applicable if you buy a newly built property (nieuwbouw)

Check out my next blog on the steps to buy an existing property.

The examples and explanation mentioned here are purely from my own experience. The examples are not to be taken as professional advice.

Leave a comment if you have a question. Hit the Like button if you liked the article!

3 comments

  1. For the outstanding mortgage remaining at the end of three years which you considered as 350,000 – 36000 is incorrect. In a way, you have considered that the 36000 is just the principal amount. But that won’t be the case. This 36000 which you pay over the spam of three years would have around 16-18k interest. Which leaves you with principal amount of 18-20k.
    So I would subtract 350,000 -18000 (worst case scenario) as the principal amount remaining with the mortgage.

    1. Hi Vaibhav, you make a good point about the outstanding mortgage. The calculation is not meant to be exact because you also get back some part of the interest from the tax authorities. If this is also taken into consideration, the calculation becomes complex. Eventually, buying will still be beneficial compared to renting (although by a smaller amount). I wanted to keep the example simple. But, thanks for your comment!

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