The decisions you make in life can have a huge impact on your future. As it comes to finances, there is one thing that might be having the most impact of all: buying a house. Timing of the market, the debt you take on and the costs of all of it is substantial.
A few Dutch finance bloggers have been writing about their career in living and housing. What houses did they live in? What financial decisions did they make? And how affected those decisions their future path? Following Geldnerd and Meneer&Mevrouw, we thought it would be fun to list our own small history of living.
Once upon a time, in the year of 2008, it was time for this little finance blogger to move out of the house. Until then, I had lived with my parents. And an education in the far south of the country (75 km away), made me decide to rent a dorm room. Luck was on my side since the place where I studied was very cheap compared to other big cities. Within weeks I found a place to stay for no less than 350 euro per month. The room was 20 square meter, and I shared a small living room, kitchen, bathroom, and garden with four other students.
My biggest win here was the decision to keep working in my hometown. I held a job there for two days per week, which paid me more then I could spend (at least that’s how it felt). I went back home every Thursday, missing out on drinking on the weekends and spending money on going out with friends.
It didn’t last that long though. I quit my education after one year, wasn’t really passionate about it, and moved back in with my parents. I worked fulltime for a while and then started a new education in online marketing and design and lived at home for the next 3 years.
Every month I was able to save a decent amount of money, wouldn’t I have to spend it all on other things…. If instead, I invested the money back then, I might even be FI by now.
At the end of 2008, I met Mr. Divnomics, and I started to spend my weekends elsewhere again. He then lived in a small studio of 30 square meters, but very close to the city center. The studio he lived in wasn’t being maintained very well, and from the start, he overpaid for the place. Once things started to get worse – like no working doorbell, stairs without railing, holes in the walls, a big crack in the windows that let the icy wind comes in, just to name a few – he addressed his living condition with the local authorities (huurcommissie), which decided that he overpaid for the house and that his rent was being lowered from €550 to €300 per month, with retroactive effect. Resulting in one full year where he didn’t need to pay rent at all. Smart move, I would say.
Two years later, in 2010, we moved in together. A nice place we rented in a big city near the coast of The Netherlands. We rented from a social housing corporation, meaning we had a very decent rent to pay: €650 (on average per year) for a 2-bedroom apartment of 60 square meters.
Somewhere in 2009, we started looking to buy a home and almost bought an overpriced apartment in Amsterdam. At the last moment, we backed out and decided to wait. At that moment I was still a student, almost finished, but without a regular income. If we waited we could get a higher mortgage and a better place to live. And so we did.
That place in Amsterdam would be worth a twofold by now. But then we had to live in a place that had nothing to bind us to. All in all, no regrets.
After college, I had found a job and a different one after that. Thus we went to the bank again, applying for a mortgage. According to the bank, we would be eligible for getting a mortgage of 410.000 euro. Say what? The rules around mortgages were tightened the year before, but we were amazed at how much the bank was still willing to lend to us. We decided it wasn’t worth it to get the maximum amount. Knowing a lot of people before us fell into the trap of killer mortgages, we set a budget of 250K on a house. It would give us a lower mortgage payment and enough room to keep saving money every month.
On one day in 2014, a local real estate agent took us house hunting. One of the houses was, with an asking price of 289k, much higher than we intended to buy. But we fell in love with that place. So, what to do? We could easily afford it, according to the bank. But we wouldn’t have any ‘Nationale Hypotheek Garantie’ (NHG: insurance resulting in lower interest rates – 3.8% instead of 4.8%) and it was way above budget.
Still, we decided to have a go at it. We started the negotiation, which lasted for about three weeks. In the end, the sellers declined our final offer and invited us over for coffee to convince us to pay a little more. We had a nice chat. I was already from that area and knew it well. Giving us the odds in our favor. They liked us and we actually managed to convince them in taking the lower offer. Go figure, what a simple conversation can lead to.
We had talked off 44.000 euro and settled on a deal paying €255.000 for it. With that price, we were also able to apply for the ‘Nationale Hypotheek Garantie’. Our monthly costs came down to 1298 euro gross per month. Today the house is worth 330.000 euro.
We have lived in there since. We have an annuity mortgage which will have us paid off the house in the year 2044. We don’t make any additional mortgage payments, instead, we invest our savings. Mostly due to the low-interest rates, and because living mortgage free isn’t really a priority for us now.
I have lived in a dorm room, rented a place together, and eventually bought our own place. Even before thinking of Financial Independence we were careful in how we spend our money. We found the perfect home for a much lower price than expected.
Would I have done things differently knowing about FI? Maybe. If there is one thing that I could have changed, then I would buy a first home where we could have rented out a part of it, the so-called house hacking. Then again, we probably wouldn’t be living in the area we have come to love.
How did your housing decisions influence your financial journey?