Buying or renting?

The key points in short

Curious about the pros and cons of buying versus renting? We lay them out for you, so you get a clear picture of the trade-offs involved. There's a lot of talk about the 'ideal time' to buy or about the great risks of homeownership. Renting is said to be 'throwing money away', while others praise its wonderful flexibility. Take a look at the benefits of both buying and renting, so you can work out what suits your situation best. It's different for everyone, of course.

1. Advantages of buying

Renovating yourself

The advantages of owning your own home include the freedom to adapt it to your own taste. You can lay a new floor in a rental too, but knocking down or building a wall is a very different matter. On top of that, you generally have stable monthly costs, as long as the interest rate stays the same. You won't face rent increases; instead, with a purchase you can calculate upfront exactly what costs to expect in the coming years. Torn between buying and renting? Calculate how much mortgage you can get to see whether buying is realistic for you.

Building wealth

The biggest advantage of owning your home is that you can build wealth through repayments. Have you taken out an annuity or linear mortgage? Then you automatically build up equity every month through the repayments you make. After 30 years, the property is fully yours and forms part of your wealth.

Buying as a higher earner

For higher earners, buying a home is often very attractive. Higher earners generally offer banks more of a guarantee, which means they can often borrow more than they initially expected. Click here to calculate your maximum mortgage as a higher earner!

2. Disadvantages of buying

Price risk

The disadvantages of buying include limited flexibility when you want to move. Particularly when activity in the housing market is low, it's not always easy to sell your property quickly. You also need to bear in mind that the sale price may come in relatively low, even below what you originally paid. You're exposed to a degree of price risk.

Maintenance

On top of that, with a purchased home you're personally responsible for maintenance. If something turns out to be wrong with the drains or the roof develops a problem, those are situations you need to sort out yourself, unless it's covered by insurance. This means you can sometimes face relatively high costs. When buying a home, it's always important to keep a decent financial buffer in reserve, so you can deal with any costly damage or issues that arise.

Costs

Third, buying a home comes with additional taxes and insurance costs. You not only need to take out contents insurance, you also need buildings insurance. It's not an expensive policy, but it's important to factor it in. Taxes on your own home include, for example, the eigenwoningforfait (deemed rental value tax), a tax based on the WOZ value of your property.

3. Advantages of renting

Saving money

On a low income? There's a good chance you may qualify for huurtoeslag (housing benefit), which means you receive a contribution towards your monthly housing costs. The advantages of renting also include responsibility for major maintenance, which doesn't fall on you but on the landlord. You therefore don't need to keep an extensive reserve for such costs.

Independence

You also get huurbescherming (tenancy protection), meaning a landlord cannot simply end the tenancy. This lets you live in the property relatively carefree, without being the owner. On top of that, as a renter you're not dependent on developments in the housing market, and you can typically give notice on a rental within a short period.

4. Disadvantages of renting

Limited freedom

On the other hand, renting also has its downsides. You have little freedom to make changes to your home. If you do make changes, there's a good chance you'll need to restore them when you end your tenancy. On top of that, renting means you build up no ownership; you make no repayments or other form of capital accumulation. You simply pay rent, and beyond the benefit of having somewhere to live, you get nothing back from it in the short or long term.

5. Summary

Advantages of buying:

• Renovate your home as you like
• Build up wealth
• Higher mortgage options for higher earners

Disadvantages of buying:

• Less flexibility
• Responsibility for maintenance
• Extra costs for insurance and taxes

Advantages of renting:

• Housing benefit and low maintenance costs
• Tenancy protection and independence from the housing market

Disadvantages of renting:

• Less freedom to make changes
• You build up no ownership