It’s an oversimplification to claim that financially it’s more beneficial to buy rather than to rent your home. The general argument here is that buying a home gives you some capital on the market and that renting is essentially dead money. When you buy, you’re investing in something and paying it off slowly so that you own a bigger part of it each month. When you rent, you’re just paying for the privilege of living there and only benefit during the time you are living in the home. As such, buying can have longer lasting appeal.
That said, you shouldn’t automatically assume you will be better off financially if you buy. Some people choose to buy too early. Due to this, they can only afford to put down a small deposit, and this leaves them with fewer options when choosing a deal on a mortgage. Ultimately, that means they end up paying more for the home over an extended period. If you don’t know how to work the system buying a home could cost an absolute fortune. There are ways to cut the costs back down such as remortgaging when you can afford to pay more, but there are still problems like charges for paying the mortgage early.
Due to this, it’s not uncommon for people to go into debt simply because they decided to buy a property when they weren’t ready. The situation can be even worse because some people just aren’t prepared for the additional costs of owning a home. Don’t forget that when you rent a property if a repair is needed that you didn’t cause, then you’re not going to have to pay for it. That could be a bill that ranges in the thousands, particularly if it’s a repair like a boiler that needs to be fixed immediately. It can put serious pressure on your finances when you are responsible for it after buying a property. Of course, the financial aspect isn’t the only issue with regards to renting or buying property. So, let’s look at some of the other highs and lows.
Freedom To Relocate
When you rent a property, you have a lot of freedom when deciding where you want to live and when you want to move. Usually, after an extended time living in the same place, you’ll be able to cancel your rental agreement and move out with short notice. Now, obviously, there is nothing stopping you from moving home when you own property. However, you will have a lot of capital tied into the home. As such, you might have to wait for the home to sell before you can move. This can be an issue, particularly if you’re moving for a job opportunity that won’t exist on the market forever.
There’s also the extra bills of moving to consider too. When you sell or buy a home, there are a lot of bills that can cost you an absolute fortune. Legal services, conveyancing, moval costs and other issues can all cost an arm and a leg. Most of these won’t be applicable if you are renting your home. Instead, you can pay your last rent, your last home bills, get your deposit back and move on. Though, if you’re renting again when you move you’ll probably have to pay fees to the company that represents the property owner.
Making Life Easy
Moving home can be stressful, but it doesn’t have to be if you rent. When you rent, you can get deluxe stunning properties that don’t need any renovative work or redesigns at all. With an HDB rental, the furniture is often built in, and that means you won’t have to buy it, cutting costs once more. You can even rent the apartment fully furnished and that means you won’t have to buy anything. Instead, as soon as you move in the property will be ready to go. Some even come with bills inclusive in the rent, so you won’t have to worry about the stress of setting up with a new supplier. As such, it’s definitely true to say that renting can be a lot less stressful. But there is one disadvantage that can’t be overlooked.
Freedom To Design
It will depend on the rental contract, but you can be limited with how much you can redesign a place when you are renting a property. You might have to be careful about making holes in walls changing the structure or even the aesthetic look of the home. Some rental agreements even forbid you to paint the walls. Obviously, this isn’t an issue when you buy a home because it’s yours. Within reason, you can do whatever you want with it.
If you do make any changes to the property, you’re renting you might find it affects your deposit and it could mean you incur extra charges when you move out. You might not be too worried about this if the deposit was a couple of hundred. But for luxurious rental properties, it could be as much as a few thousand. At that point, you will probably be eager to do everything in your power to get that money back once the tenancy ends.
That said, the flip side of this is that these properties are often set up so that they need very few changes if any. As already mentioned, they often have built in accessories and even tech equipment, so there’s really no reason for you to risk losing your deposit by changing something in the home.
Not Your Land
It can be a little tricky coming to terms with the fact that you won’t have any rights to the land when you rent. This means that while you can’t make changes while you’re living there, the owner certainly could. So, you might be renting a home with a lovely garden that has screener trees all around the backyard. It’s been providing you a lot of privacy. Well, there’s nothing to stop the owner deciding to cut those trees down while you’re living there, leaving you with no privacy at all. While this an extreme example there is often nothing in a rental agreement to prohibit an owner from doing this.
Of course, this does point to another advantage of renting too. Since they own the land, they are often responsible for keeping it neat and tidy. So, you might find that they hire a gardener to cut the grass in your yard. Or, that your home is regularly inspected for exterior issues that need to be fixed right away. As such, it’s a great option if you’re not much of a DIY nut
Thinking back to finances for a moment, it’s worthing considering the typical mortgage. You see the typical mortgage doesn’t often stay at a fixed price. The charges you will be expected to pay each month can rise based on various factors including the interest rates on the market. Again, it is worth getting around this by remortgaging with a different lender, but that can still be quite tricky. So, you might be paying a lot more for the home than when you started owning the property.
This isn’t the case with rent payments. You can rely on rent costs to stay constant at the price that you’ve always been able to afford in the past. As such, you should never be in financial trouble, purely due to living costs when renting a property and the same can’t be said buying a home.
Do You Actually Own Your Home?
This is an interesting point that many people overlook. Most people can’t afford an outright cash purchase of property. They have to get a mortgage, and a mortgage is just another word for a loan. Essentially, the majority of the property is owned by the mortgage company, and you’re slowly paying off the money you owe to buy the property often with interest. So, what happens if you suddenly can’t make the payments or the mortgage repayments get too high?
Hopefully, you’ll be able to explain your circumstances to the lender, and they will then evaluate the situation allowing to pay less for longer, often with more interest. The good news is that you’ll still get to live in the house in this scenario, but that’s not always the case. It is within their power to take full ownership of the home and get you evicted. At that point, they own a house that you could have been paying off for years.
So, until you have paid off most of the mortgage or you have paid it off completely, you don’t really own the home at all, the lender does. This would leave you just as vulnerable on the market if you were indeed renting a property. One advantage then of buying a home isn’t really relevant at all. At least, not for the first couple of years when you purchase your first home.
So which is the right choice? Well it really depends on the stage in life you’re at, your finances and whether you want the benefits of renting or buying a home.