Are You Better Off Renting or Buying Your Own Home?
Noticed that your landlord keeps putting your rent up? Have you heard how interest rates are so low nowadays? You might consider moving from renting to buying your own home. But before making this huge step, there are things that you must consider deeply.
You may have enough savings for a home deposit, yet you must also contemplate on the total costs of home buying. It is also best practice to list down a comparison and contrast between renting and buying a home of your own. This list of pros and cons should also be pondered along with your current personal financial situation, future plans and goals.
Payment Terms
Rent: Usually, the term for a lease is fixed from 6 to 12 months.
Own: Depending on the changes on the interest rates, the repayments to be made for a home loan may oscillate. However, by fixing your home loan interest rate, this may be minimised.
How Much Payment is needed?
Rent: Especially if you are sharing with another tenant, it is possible for rent to be less than mortgage repayments.
Own: Mortgage repayments may be more significant than those of rent but this enables you to save by building equity in a valuable asset.
What do you Pay for?
Rent: Your rent may be used by your landlord to pay off the mortgage on the building you are leasing or his/her other property under mortgage.
Own: The mortgage repayments, both in principal and interest, will drive your ownership of the property. In addition, it is also possible that this property’s value will appreciate over time and thus, build your overall wealth.
What if the Property Value Increases
Rent: If the rental market becomes more competitive and your landlord may be compelled to have you to pay more rent because the value of the property also increases. However, if the market declines, this may not guarantee that your rent will also be decreased.
Own: The value of your personal wealth is directly affected by the increase or decrease of the value of your property. This means that your personal wealth and profit will increase as well, and vice versa if the property value and the market declines.
Personalise
Rent: Since you are only renting the property, you would have extreme restrictions when it comes to making your home more personalised. Additionally, pets may not be allowed in the rental property.
Own: Being the owner of the house, you have the freedom to decorate and personalise your property as these improvements also appreciates the value of your home. You can also have the pets that you want…within reason.
Maintenance
Rent: Your landlord, not you, is the one responsible for the building maintenance.
Own: You have the control and responsibility to keep your home in good condition. Hence, you will have to sustain a budget for repairs and other renovations you wish to get done on your home.
Commitment and Tenancy
Rent: A lease is not usually locked into a long-term commitment other than the lease term and you have the freedom to move out at short notice. Also, it is also possible to be kicked out by your landlord with only a few weeks’ notice at any stage beyond your rental agreement.
Own: Home ownership would mean a bigger commitment as you are usually locked into longer terms, especially if you are under mortgage. Hence, you can live or use the property as long as you want to.
It is a general assumption that renting is cheaper than owning your own home. However, it is not always the case as there some instances where in buying your own home will enable you to save more money.
Buying your first home is indeed as exciting as a rollercoaster ride especially if you have chosen a great property whose value may appreciate over time as the balance of your home loan will continuously decrease along with the principal payments.
It may seem to be hard and overwhelming at first, but think of how one day, your home could be paid off completely and you can enjoy life without the burden of mortgage and paying rent.
However, if you realise that you may not afford to buy on your own, you can opt to buy with a buddy or a family member. You may also seek some expert advice of a mortgage broker to help you decide which financial strategies are best to help you achieve your home goal.
Uncertain if you are better off renting or buying your first home?