Buying a house: how much can you borrow, what costs are involved and why buying often pays off
Buying a home is an important step for many people. It is not only a place to live, but also a financial decision with long-term implications. In a market where rents are becoming increasingly expensive and purchase prices seem high, many people are asking themselves: is buying still a wise decision?
The short answer: yes, provided you are well prepared. In this blog, we will explain how banks assess your situation, what you can realistically borrow and why buying is still more attractive than renting for many people.
What determines how much you can borrow?
When you apply for a mortgage, a bank will mainly look at your income and your fixed expenses. The basic principle is that your monthly payments must remain affordable in the future. That is why they look not only at the repayment, but at the total monthly cost: interest and repayment together.
How high those monthly payments can be depends on several factors:
- your gross annual income
- the interest rate
- the term of the mortgage
- the energy label of the property
The more energy-efficient the property, the more scope there is to borrow. This makes sustainability not only pleasant to live in, but also financially attractive.
What does that mean in concrete terms?
Suppose you have a stable joint income and your eye is on a property with a good energy label. In that case, a monthly payment comparable to your current rent could suddenly lead to building up equity, instead of paying rent every month without building anything up.
With an interest rate of around 4% and a term of 30 years, a monthly payment of approximately € 1.050 would allow you to obtain a mortgage of around €225.000. That amount increases as your income rises or your home becomes more energy efficient.
How much of your own money do you need?
Many people think that you always have to contribute a large part of the purchase price yourself. In practice, it is more nuanced than that. Banks finance up to the appraised value of the property. If that value is higher than the purchase price, (part of) the costs can sometimes be co-financed.
Your own money is mainly needed for:
- costs that exceed the appraised value
- situations in which your income leaves less room for manoeuvre
The exact amount varies per situation. There is no fixed percentage that applies to everyone.
What costs should you take into account?
In addition to the purchase price, there are additional costs, such as:
- notary fees
- transfer tax
- valuation costs
- advice and brokerage fees
For flats, building insurance is often already arranged through the owners' association. This reduces the monthly costs. It is a good idea to clarify these costs in advance so that you know where you stand.
Buying versus renting: what is the difference in the long term?
For many people, renting feels safe and flexible. But the reality is that rents have risen significantly in recent years, while you are not building up any equity.
When you buy:
- you pay monthly for your own home
- you pay off your mortgage and build up equity
- you may benefit from an increase in value
- you often have more control over your housing costs in the long term
For many people, the monthly cost of owning a home is now not much higher than renting a comparable property, with the difference that when you buy, you are investing in yourself.
Looking ahead brings peace of mind
A mortgage is a long-term commitment. That is why it is important to look beyond the present and consider possible changes, such as expanding your family, working less, starting a business or fluctuations in interest rates.
By taking these factors into account in advance, you can make choices that will continue to feel right in the future.
In conclusion
The housing market is challenging, but buying can still be a smart move, especially now. With the right preparation, realistic expectations and good advice from a purchasing agent, you can buy a home that is not only pleasant to live in, but also contributes to your financial future.
Would you like to know what is possible in your situation, or have a no-obligation chat about buying versus renting? Then it is always wise to have that conversation. Good insight makes all the difference.
