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Has it ever crossed your mind to buy a house in the Netherlands? Has the Netherlands become your home more than you consider your home country to be? So much so that you don’t ever see yourself leaving the Netherlands again? Or, are you just thinking about making a good investment by buying a house here? Well, here’s some good news for you! Expats are allowed to buy property in the Netherlands!
Serge Pouw, the co-founder of Independent Expat Finance, explains why he thinks buying a home beats renting one financially by a mile.
Let’s start by seeing how the monthly expenses compare. For this, we will use an example of an average 75m2 apartment in Amsterdam.
To rent an apartment of 75m2 in Amsterdam, you can expect to pay 1.500 euros a month. To buy a similar apartment, you would have to pay about 500.000 euros. You could finance this fully with an annuity mortgage with interest fixed at 1,75% for 10 years. This would mean your gross monthly expenses are 1.667 euros and net 1.567 euros (net = gross – tax rebate). The mortgage expenses seem to be a little bit higher than the rent.
However, the monthly mortgage expenses consist of two components, the interest payment and loan repayment. Over the course of this mortgage, the average gross monthly interest payment is 279 euros. This is what you are paying the bank for the loan and you will never see again. The other part is the loan repayment, the average of this is 1.388 euros per month. After repaying this month after month, you will have paid off your full mortgage in 30 years.
So, even though the total mortgage expenses seem a little bit higher than your renting expenses, if you compare the interest payment to renting (in both cases, this is the money you are “throwing away”), it is a much better investment.
Also, when you rent a property, your landlord can slightly increase the rental price for inflation and extra profit every year. This yearly adjustment can make a big difference over time. When you have a mortgage, this is not the case. There is no inflation adjustment you need to worry about.
Let’s continue using the above example and add the scenario that you are moving abroad after living in the Netherlands for 10 years. By this time, your outstanding mortgage debt, which started at 500.000 euros, is now 353.670 euros.
If you decide to sell your apartment (let’s assume prices have not changed, although, over a long period of time, this is mostly expected), you will receive 500.000 euros. The outstanding mortgage then needs to be paid off and what remains will go to your bank account: 146.330 euros. We often get the question from clients if they need to pay tax over this. The answer is simple: No.
Another option you would have is to rent out your apartment when you move abroad. When you have a normal mortgage, banks mostly won’t allow you to rent out a property, as it lowers the value and renters can gain certain rights.
However, you can switch your mortgage to a buy-to-let mortgage, which is specifically designed for this 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.
If you want to explore your options, you can reach out to the expat mortgages specialists of Independent Expat Finance.