Whether it is better to rent a property or to own it is a long-standing debate. Some people argue that it is better to purchase because the property is yours to do with as you wish, you can have it for as long as you like, and you earn from the long term capital appreciation.
It can be said that rental expenses are just your money disappearing into someone else’s pocket. Still, others contend that renting may be the superior option since you only pay rental fees. When you rent, you don’t need to pay interest on a mortgage, a conveyancing solicitor to transfer your title or annual property taxes. Because of this, some people go on to live their entire lives renting their homes.
The fact is that there might be no “better” option between the two. It may just be that one of these options is the correct response based on three things that tip the scales in either direction. The three factors that largely affect a decision on whether to purchase or to rent are time, capacity, and cost.
If you intend to live in a particular area for a short time as a transition place or to be near work, then renting seems to be a better option. Renting allows excellent flexibility for the user. You can relocate at the end of a lease period to a different neighbourhood or a bigger residential unit.
Most rental options offer annual leases, while others are more lenient by offering three, six, or nine-month options. You can usually negotiate with a landlord on the timeframe, but typically a shorter lease option may cost slightly more. You can ask your leasing agent to scout for rentals options based on your time limit, and you can make your selection from there.
Buying, on the other hand, is a long-term investment. You undoubtedly will be tied to a particular area by placing a significant financial investment there. Buying a house or an apartment means you are deciding to settle down in a place for the foreseeable future.
The second major factor between deciding whether to rent or buy is capacity. Even if you have plans of settling down in a particular neighbourhood, your financial situation determines whether or not you will be able to purchase a property.
Capacity can be affected by your job status and your obligations. When lenders look at your financial position, they will take into account your sources of income and deduct your financial commitments like debt and credit lines, as well as your living expenses, and determine your borrowing capacity based on this information. You will need enough excess income to pay for a mortgage in order to buy a house.
When landlords check the capacity of renters to pay their obligations, they are not as stringent in their requirements as a bank would be to someone they are lending money to. Rentals usually require a few month’s deposits, depending on your contract. After the initial deposit, payments are made in monthly or quarterly instalments that allow you to stagger your living expenses. This is especially useful if you aren’t awash with cash. Even if you are earning more than enough for your living costs, you may still not have enough savings to make a purchase.
Your financial situation will determine your capacity to afford to buy. To be able to purchase a house, you will need at least enough cash for equity, proof of substantial income enough to pay for your mortgage, and documents showing a good credit rating. If you are not yet at a point in your life where you have these three, it can be extremely difficult to become eligible for financing.
Capacity is largely a product of your priorities. You may have enough cash for a mortgage, but if your main priority is to spend that money on educational pursuits, travel, or purchasing expensive clothing and accessories, then you will not be influenced to buy real estate.
The third primary consideration that influences the decision to purchase or rent is the total cost. When entering into a lease, the charges involved are your rental payments and your utilities. All other maintenance costs, taxes, and homeowners association dues are typically already pro-rated and included in the monthly rental. If you choose a furnished unit, you can even avoid costs to purchase furniture and appliances. Essentially, in a rental scenario, your expenses cover only for what you presently need.
When you purchase a piece of real estate, there are many costs behind the initial price tag of the house. You won’t just be paying for the house, you will need to pay your lender for mortgage, valuation, and survey fees. You also need to pay stamp duty and land registry to the government. You will have to shell out cash for a conveyancing solicitor. If you used the services of a broker, you might need to give them a commission.
After you have moved into a house, you may need to spend on refurbishment, repairs, and regular maintenance. Your property will be yours to do with as you wish, for however long you want, however, you will also be taking on significant financial responsibilities for the same amount of time.
When you weigh your options, do as much research and data gathering as possible. If you have decided that buying a house is the right option for you, there are various resources available online, which can help you estimate the costs involved. The more information you have before you proceed the better prepared you will be to handle the financial obligations that come with homeownership.
You can estimate mortgage payments and interest rates through potential lenders’ sites. Enquire with your local authorities on the land registry fees in your area. You can also get conveyancing quotes or compare and calculate conveyancing fees online.
Whether you choose to buy or to rent your dwelling place, understanding the various factors that affect your decision can help you determine which option is the best for you.
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