Rent vs. Buy a Home: How to Know Which is Best for You
The thought of moving into a home is bound to be exciting.
However, you may be unsure whether to take out a mortgage or rent a property, and that’s understandable. Both options are a big personal and financial commitment.
And, each option will have different advantages and disadvantages, so it is important you review them carefully to make an informed decision.
The Advantages of a Mortgage
The biggest benefit of taking out a mortgage is the fact you will own the property. That means you can design and decorate it any way you choose.
It may also be worth buying your own home if you plan to remain in the property for five years or more. By staying in the home for a lengthy time, you will are more likely to recoup the transaction costs at a future date.
It also is important to note you will be required to put down a deposit on the property, with many banks requesting a minimum deposit of 20%.
So, if you have considerable savings in the bank or the means to save a 20% deposit, you could be an ideal candidate for a mortgage.
If you are lucky enough to find a mortgage with a low-interest rate, you will decrease the amount of money you will have to repay on the loan, so it could be a worthy investment.
If you would like to learn more about a property’s mortgage rates, we recommend using a home loan repayment calculator to estimate your minimum monthly repayments and the amount of interest you will need to pay.
However, if you choose to rent, those monthly payments will go straight to the landlord instead. They will likely use the money to pay the mortgage on the property. So how can it be better to rent?
The Advantages of Renting
After reading about the advantages of a mortgage, you may have decided whether purchasing a property is the right financial path for you.
However, it is important to note that there are many benefits to renting, too.
Buying a mortgage can be expensive. Not only will you be tied to minimum monthly repayments, but you will also be required to put down a deposit on the property.
Renting can be a more affordable alternative to a mortgage, as people with limited funding can move into a property without the lengthy financial commitment.
It may also be worth renting a property if you are unsure about your current employment situation.
If you are currently fearing redundancy or believe you may soon be parting ways with the company, stop. Right now might not be the best time to embark on a big financial commitment like home buying.
Also, if you are currently experiencing a life transition, such as a divorce, it could be a wise move to initially rent a property over buying a new home.
There are many pros for renting or buying a property. The decision will be determined by your personal and financial circumstances, as well as your own risk tolerance.
Just ensure you are 100% confident in your decision before you sign on any dotted line.
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