It is a fact of life that everybody needs to have a roof over their heads. However is it a better option to own your own property or rent one?
This is a question that has been asked many times before, and I suspect the answers you will have received 10 years ago would be very different to the answers you might get today. There was a time when property was very cheap to buy, and with prices on the rise the trend was to buy for future profit! Now there has been a global crash in house prices people view the situation very differently.
What we can do is look at the situation in general, and try to come up with sensible arguments for and against both.
Long Term Plans
The first thing that should be considered when deciding whether to buy or rent should be your plans for the future. Do you intend to have a family in the near future? Are you looking to stay somewhere for a short period of time and then settle in a different part of the country? Do you travel a lot for work?
These are all questions that need answering in order to gain some insight into what is going to suit you best. For a couple looking to settle down and have a family, owning a home may be a sensible option. A couple who like to travel, change jobs regularly, and are more free spirited may be better suited to rented accommodation.
You need to be really clear as to your position in life, and future plans because if you commit to buying a property, it becomes much harder to just up sticks and move on if your plans change.
Although how the world economy and housing markets are performing should at least be investigated, it is your own personal finances that should determine whether you are better buying or renting.
For people who have enough money to buy then this could be a good time economically to proceed because house prices are much lower than they were a few years ago. This is due to the world credit crisis.
Many countries also have very low interest rates at present which could also benefit those looking at buying. This is all great for those who already have enough money put by to buy a home, however for those who need to borrow, lending is at an all time low in most countries meaning even people that want to buy cannot raise the funds to do so.
This of course also restricts the people looking to move up the property ladder and buy a bigger home. In other words if you want to buy, and have the money then it’s a great time to buy, but if you don’t have the money then you will find it hard to raise enough to get anywhere close to buying.
Why Would I Want to Buy?
Let’s look at some of the reasons people decide to buy their home instead of renting:
Security – When you buy you are paying for what will eventually be a home owned by your family. Nobody can kick you out, and you are able to keep that home in your family for generations.
Investments – Although property prices are low at present, there is always the possibility that they may one day increase again which could make people who buy today a nice profit somewhere down the road. Of course this is something that you will only benefit from if you buy a property.
No payment increase – When you rent you are always susceptible to rent increases. If your landlord decides to increase the amount of rent you pay then you will have to shell out more.
When you buy a property eventually you will pay the mortgage (if you have one) off, and that will mean no more payments towards staying in your home. When you rent a property you have to pay for however long you are there. In other words your payments will never stop.
Do as you like – In a brought property you can make any alterations to it that you want without permission. If you want to rip up the carpets and lay wooden floor then you can do it.
If you want a whole new bathroom suite then you can go straight to your local home improvement store and get one. This is a luxury that renting does not allow. No changes can be made to the property without the owner’s permission which is of course not guaranteed.
What About Renting?
Renting a property is not all bad. In fact there are some big advantages of renting that are not available with brought homes:
Repairs are not your responsibility – There’s a big storm and your roof gets damaged. It is down to the owner to pay for the roof repairs and not you. If your water tank fails and needs replacing then again it is the responsibility if the owner to fix the problem as soon as possible.
When you sign your tenancy you need to check what you are responsible for and what your landlord is responsible for so that there is no future confusion.
Not tied down – If you decide you do not like the area anymore and want to move then you can. Leaving a rented property is a much quicker and easier process than homeowners have to deal with.
Not affected by interest rates – When you are paying a home loan and there is a hike in interest rates, homeowners can find hundreds added to their monthly loan payments. If you rent you are mostly unaffected by these interest rate rises unless your landlord decides to raise your rent.
As you can see there are both positives and negatives on both sides, and much depends on your personal and financial position. Be certain of where you are in both these areas and you will be in a much better position to make an informed and accurate choice.
This article was written by Timothy Ng who is a regular personal finance writer and part of the team at Credit Card Finder, a 100% free Australian credit card comparison and application service. Visit the Credit Card Finder website for more information on buying or renting a home.
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