So you’re considering purchasing a property, possibly your first? But you’re not sure if you’d be better off continuing to pay your monthly rent, and you’re not sure how to find out which option is best for you. In the end, the solution is determined by a number of variables, which are outlined below. Read on to know more about owning vs. renting an affordable house and lot.
The inclination generally leans toward ownership of the two possibilities. We are constantly told that owning a house is the key to happiness and the fulfillment of most, if not all, of our aspirations. In theory, owning a house isn’t always preferable than renting, nor is renting necessarily easier. It’s a subject that necessitates making a decision, weighing the benefits and drawbacks of each option, and determining which is best for you.
There are compelling reasons to buy a home in retirement, but there are equally compelling ones to rent. If you don’t have to pay for upkeep and repairs, the latter may be less expensive. However, if you don’t have to worry about your landlord raising your rent, ownership might be less stressful.
Housing expenditures will be one of your primary monthly expenses in retirement, regardless of which path you take. There are some things to think about while deciding whether to rent or purchase a house.
Factors when deciding on renting vs. owning affordable house an lot:
1. MONTHLY BUDGET
The first step in choosing your home destiny is to determine how much money you can spend comfortably. First, figure out how much money you make each month from all of your side hustles and tax deductions. Then subtract what you spent on necessities such as food, transportation, and some emergency funds. The rest is up to you to utilize as you see fit for your living spaces. A reasonable rule of thumb, according to Bill Engel, a certified financial adviser, is to keep overall housing expenditures, whether renting or owning, at approximately 28-30 percent of your gross monthly income.
2. PREDICTED EXPENSES
When you rent, you know precisely how much you’ll have to pay for accommodation each month, however, renters may face unpredictably high rent increases on occasion. Owning a house comes with a lot of upfront expenditures; one month you might simply pay your monthly mortgage payment or normal bills, the next month the roof can start leaking, and the next month some improvements might be needed; all of this adds up to a lot of extra costs. When a property is owned rather than leased, it is consequently difficult to estimate monthly expenses.
3. STEADY OR ON THE GO?
Owning a home vs to renting provides intangible benefits such as a sense of stability, connection to a community, and pride of ownership. However, before making this selection, other variables should be considered as well. How long do you intend to stay in the region, for example? Generally, the longer you expect to stay in a property, the more economical it is to purchase. Homeownership, on the other hand, would not be a smart choice for those who work at a number of locations; it would be more practical to rent rather than own. Real Estate is one of cannot be easily converted into cash(in terms of market value). If the property market is down, you may not be able to sell when you want, and even if it is up, there are major transaction fees to consider. When you buy a home, it is much more expensive to change your mind about where you want to live.
Renting, on the other hand, allows you to move whenever your lease expires without penalty, but it also means you may be forced to relocate quickly if your landlord/lady chooses to sell the property, convert your apartment complex into condominiums, or raise the rent beyond your means.
4. DOWN PAYMENT
A down payment is required when purchasing a home. The portion of the home’s selling price that you pay ahead, usually at closing, is known as your down payment. You must include a down payment amount in your purchase offer, but if the seller agrees, you can modify it before closing. Your down payment amount varies greatly depending on your credit score, local market circumstances, and the type of banking house loan you’re accepted for, but it generally ranges from 3.5 percent to more than 20% of the purchase price.
5. ONE TIME COST
Furnishing. If you’re a first-time homeowner, your new house will almost certainly be larger than your old one. Even if you own part or all of the furnishings in your rental, you will need to purchase furniture and fixtures. Furnishing is less expensive if you’re a repeat customer. Regardless, your outfitting costs will most likely differ depending on your budget. Buying used furniture and fixtures is a fantastic method to save money on this.
Depending on how much you have to move and what you can do on your own, moving can cost anywhere from P5,000 – P10,000, depending on whether you hire a team of movers or rent a truck and do it yourself.
Projects for Improvements and Renovations If you want to do a home remodeling or renovation project, you can either pay for it yourself or acquire a home improvement loan from a Pag IBIG fund. The cost of a project varies greatly. A complete kitchen remodel or bonus room addition may easily cost more than P20,000 whereas yard fence or porch furniture updates may just cost around P40,000. Though improvements and renovations might increase your home’s appraised worth, this isn’t always reflected in the final sale price.
To aid you in making up your mind and have some helpful details with your decision, I’ve compiled a list of pros and cons of owning vs. renting a house:
ADVANTAGE OF BUYING A HOUSE
1. IT BUILDS UP EQUITY
Homeowners, unlike renters, accumulate equity over time. On most mortgages, a portion of each monthly payments is used to pay interest on the loan. The balance is used to pay down the loan’s principle.
You may also increase the value of your house and hence decrease your LTV by making wise home improvements. For example, the house my wife and I just bought has nothing but a rutted dirt road with a little shed at the end. Paving the driveway and replacing the shed with a true detached garage would significantly improve the property’s usefulness and curb appeal, perhaps increasing its value by more than the project’s entire cost. You can easily acquire funds to do this type of project at Pag IBIG where they provide you a short-term loan to use for home improvements and renovation.
2. TURN IT INTO A BUSINESS
Even if you don’t think of your house as an investment property at first, it may be turned into one. This can help you pay off your mortgage, property taxes, and insurance payments in part or in whole.
The simplest method to accomplish this is to rent out a portion of the entire property, as long as you follow all local rental property rules. You may rent out a guest room to a friend, live in one duplex unit and rent out the other to strangers, or buy and move into a second house, leaving your entire property available for rent.
3. YOUR HOME AS YOUR CREATIVE CANVASS
As a homeowner, you have complete control over your design, DIY project, and home improvement decisions, as long as they don’t contradict local building laws or homeowners’ association guidelines. To your heart’s delight, you may paint walls, install new bathroom fixtures, remodel your kitchen, complete your basement, or create a patio or deck.
Changing your living environment drastically to fit your moods is a pleasant, even therapeutic part of owning – yet it’s usually not an option for renters.
DISADVANTAGE OF OWNING A HOUSE
1. MIGHT RESULT IN FINANCIAL LOSS
Although owning a house develops value over time, equity does not always translate to profit. You risk a financial loss when you sell your house if home values in your area drop or remain constant throughout your time as a homeowner, pulling down the appraised worth of your home. Renting does not develop equity, but it also does not expose you to the risks of owning a depreciating asset.
2. EMPTY HOUSE
A rising trend in high-end real estate transactions is completely furnished new construction residences. Or what they call RFO (Ready for Occupancy) house and lot. While this concept is appealing, it is not often used, especially in single-family homes. Unless your old house was similarly sized and furnished, you’ll need to invest time, money, and effort into outfitting your new home.
Many rentals, on the other hand, come fully equipped. Even if their design doesn’t quite fit your preferences, furnished spaces save time and money at the beginning of your term.
ADVANTAGES OF RENTING
1. MAINTENANCE AND REPAIRS IS NOT YOUR PROBLEM
You are not responsible for house upkeep or repairs as a tenant. You don’t need to hire an expensive repairman if a toilet backs up, a pipe burst or an appliance breaks down; instead, contact your landlord or supervisor.
2. EASY RELOCATION
Relocating for employment is easier, less time-consuming, and perhaps less expensive when you rent. Renters who move jobs frequently (or who have steady employment that entails frequent mobility) usually rent until their professional lives settle down. Though a sudden move may force you to violate your rental agreement, you may mitigate the expense by subletting your flat or negotiating with your landlord.
Selling a home, on the other hand, requires time and work. If you need to sell your home quickly, you may have little choice except to accept a lesser price and risk losing money.
3. SOME FREE UTILITIES
Most or all utilities, including non-essentials like cable television, are covered by many multi-unit building owners. In smaller structures, such as condominiums and single-family houses, the technique is most popular, although it is still inconceivable for other landlords. Homeowners, on the other hand, are responsible for the whole cost of utilities, which may be cost around P10,000 to 15,000 per month depending on the size and usage of the home.
DISADVANTAGES OF RENTING
1. FORGET ABOUT THE EQUITY
Unless you have a rent-to-own arrangement in place, every money you pay in rent is gone for good. Under a normal lease arrangement, no matter how long you stay in your rental apartment or how good a tenant you are, you can’t create equity in the property. If you plan on living in the same place for more than a few years, purchasing rather than having monthly rent payments may be a better financial decision.
2. UP AND DOWN RENT BILLINGS
Unless you reside in a city with rent control, instead of having a fixed rate mortgage, your landlord can raise your rent after your current lease expires. Rental property owners boost rates to keep up with market rent increases, to force current tenants to depart rather than sign a new lease, and for a variety of other reasons.
You’re less likely to suffer harsh rent hikes from year to year if you have a strong connection with your landlords. But no matter what you do, you won’t be able to completely manage your rent.
The decision to buy and start owning vs. renting appears to be based on where you are in life – financially, professionally, or with your family. Ownership provides the most flexibility and independence, as well as the priceless chance to build equity in one’s house. Owning also offers you the freedom to do whatever you want with your home, something you won’t be able to do with a rental. Furthermore, ownership may be an investment, which is something that renters do not have. In the long run, all of these considerations, along with the numerous additional perks and kinds of financial support that comes with the property, give owning the upper hand over renting.
If you decided to own a house, BRIA is a good place to look for. Bria Homes is a company that caters to regular Filipinos who dream of owning a house and lot that is both high-quality and cheap. We offer economical houses that is inside a lovely community that is fit for you and your family.