Which Decision Is Preferable, Buying Or Renting A House?
Most people find it enjoyable to purchase their first home, especially if it is their dream home. One of the major expenditures in an adult’s life is a home, and buying a home entails one of the most crucial financial decision-making.
A home loan is typically required to fund the purchase of a home. You also need to understand the process of getting a home loan to help you save time, avoid uncertainty, and reduce unnecessary stress.
The Benefits Of Buying And Renting A House
Owning your own property will make you feel proud as your goals and objectives have been accomplished. Having a comfortable location for families to stay will make you feel safer.
You can increase the net property value when buying a home while making mortgage payments. Each payment will reduce the loan balance and will increase your home equity (excess house market price minus loan balance). You can refinance after the loan is paid off. However, if your home equity is sufficient and the loan is necessary or irreplaceable, refinancing should be taken into consideration.
Rental rates can increase from year to year. If you buy a home, the principal loan balance
decreases every time a payment is made. Furthermore, house prices will increase as the
property market increases if your home is strategically located.
The following commitments relate to purchasing a home:
● Owning a house requires you to take the time to maintain and refurbish it.
● The frequency of tiny adjustments might raise the price of adjustments. On the other
hand, if you rent, the landlord will typically cover these costs.
● Additionally, you are “attached” to your house because, in contrast to a tenant, you are
not allowed to move freely.
● If you don’t fit in with the neighborhood, you’ll be “trapped” there until the value of your
home increases, at which point you can sell it and move.
● Numerous factors could lower housing prices. For instance, the main road leading to
your residential area may be crowded due to recent construction, or your home may be
in a flood zone.
Rental Guidance
● When you cannot make the required loan or a down payment on a home purchase.
● When you expect the real estate market to go down.
● When you are still looking for a suitable location before buying.
● When you do not want to be concerned about overhaul and maintenance expenses.
What aspects should a person take into account when buying a house as an investment?
Real estate investing is a good investment strategy that enables you to accumulate wealth, particularly if the home you’re buying is about to be rented out.
Important questions to ask before deciding to purchase a house as an investment include:
● What types of properties can increase my financial value?
● How much rent can I get from my property?
● Is it possible for me to manage and preserve my property over time, even if my cash flow
is uncertain (especially if there are no tenants)?
● If the property is a non-liquid asset (not easy to sell), does this cause me problems if I
need cash later?
There are two factors that you should consider before buying a home, which are non-financial factors and financial factors.
| Property Location | You need to decide where you want to live and what kind of neighbourhood you are in. Many factors can influence your choice of location. Among them are: |
| ● Basic amenities such as shops, banks, post offices, schools, hospitals, recreational parks, and neighbourhoods ● Public transport facilities ● Workplace distance ● Traffic bustles ● Safety | |
| Types of properties- landed property or multi-storey property | The price of landed houses is usually higher, especially if they are close to urban areas. While the prices of multi-storey houses, such as condominiums and apartments, are usually more affordable. Usually, the market value of landed houses will increase faster compared to multi-storey houses. |
| Types of titleholding-free hold or leasehold | A freehold property or one having a freehold title gives you perpetual ownership of the property. Leasehold properties mean that you only own the land for the agreed-upon lease term, which is typically 99 years. The property shall be returned to the authorities after the expiration of the lease unless the lease period is extended by making a premium payment. Therefore, the market value of freehold properties is usually higher than that of leasehold properties. The value of leasehold properties usually decreases when it is nearing the expiry of the lease. |
| Types of deeds of the title-individual property or strata property | The deed of title proves that you own a property. You will be granted individual ownership of the temporary land title of the strata title to the condominium or apartment owner. You should check if there are any obstacles or restrictions on the property as it affects the transfer of ownership or sale of the property; preferably talk to a property consultant or lawyer, or seek advice from an experienced party on the property market before you pay the down payment. |
| Developer reputation | Most developers adopt a “sell first, build later’ approach. If you buy a house under construction, you will start paying before the house is completed. Therefore, you need to study the developers’ backgrounds and track records. Research their past projects to see whether they kept their promises or not. Check: ● Whether their previous projects were completed on schedule or not, ● Work of high quality ● All facilities are provided as stated in the brochure. ● How satisfied previous buyers are with their purchase ● If the housing project is abandoned, you are still responsible for repaying the loan to the financial institution even if you do not get the property. For this reason, reputable developers with a solid track record typically mark up the selling price of their real estate developments. |
Financial Factors
Value Your Capabilities
Check your cash flow and net property value to see how comfortable you are with your finances. Both are financial scorecards that can be used as a guide when making decisions regarding money.
Usually, there are two considerations related to ability:
A good estimate for a house’s down payment is between 10% and 20% of the house price. You should also allocate 5% to 10% for related incidental costs, especially legal fees and stamp duty.
