When you were a kid, you probably listed down “buy a house” as one of the things you wanted to do when you grew up. But ask yourself now: how applicable is it to you? Are you still in the buying state of mind, or is renting becoming a more appealing choice?
What’s your budget?
Chances are, money was your first consideration when you made the decision to find a new place to live. After all, buying or renting a home entails costs that go beyond the price of the property.
As a buyer, you have to think about other payments too, like your agent’s fee, closing fees, property taxes, registration, and monthly amortization. Once you move in, you then have to consider water, electricity, internet, cable, and other utilities, plus repair and maintenance costs.
In some cases for rentals, landlords throw in utilities for free to attract renters. Also, you don’t have to call a guy to fix that leak; if it’s routine maintenance and repair, the landlord’s in charge of handling it. On the other hand, landlords do have the right to raise the rent (if the property isn’t covered by the Rent Control Act of 2009), so you can expect to pay a little more year after year.
How stable is your job?
Employment stability is one of the things that can affect your ability to pay for your property, whether you’re planning to buy or rent.
As a homeowner, losing your job won’t matter to the institution you got your loan from; they’ll still expect you to pay every month or you risk losing your home too.
If you suddenly experience a pay cut while renting a swanky condo, it’s much easier to pack up and move to a much more affordable unit. But with a smaller budget to start with, you’ll have to sacrifice a lot to find a property similar to your previous one with a lower monthly rate. The first things usually off the list? Floor space and ideal location.
How long do you plan on living there?
Determining the length of your stay is a big factor in your decision to buy or rent because it affects you’re a lot of your deciding factors such as your budget and preferred neighborhood.
Owning a home means permanency; there’s no fear of some landlord asking you to leave for whatever reason. Having a home of your own also means you have a place to retire to should you choose to keep it forever. And once you’ve paid off your loan, the property becomes part of your estate and you can pass it on to your kids when the time comes.
But let’s look at it from another point of view: renting allows for more mobility. Has your company relocated you to another city? Is your neighborhood not as appealing as it used to be? No problem; all you need to do is wait for the end of your lease or talk to your landlord about getting out of it earlier and you’re free to go.
Do you like to renovate?
Are you a home project junkie inspired by Martha Stewart or too many “Extreme Makeover” episodes? The weight you put on this aspect will affect your decision to buy or rent too.
When you buy a home, no one’s going to stop you from personalizing it as much as you want. Want a red exterior? Go crazy. Need to add a room to your house? Add away. And further down the road, you can easily make it baby-friendly if you’re in the family way, or add wheelchair ramps or handrails if you want to eventually retire in. But keep in mind that renovation comes with costs, whether you turn it into a DIY project or hire people to do it.
Tenants often complain that they have little to no freedom when it comes to changing their rental. Sure, some landlords allow you to nail a few frames to the wall or paint the walls, but they want you to change the unit back to the way it was, which means double the effort and spending for you. If you’re someone who likes to keep things simple, though, these restrictions probably won’t frazzle you in the least.
Crunching the numbers
Now that you’ve answered the above questions, we can put them into better perspective by throwing a few numbers in. Let’s take a look at these two similar properties:
Using a loan calculator, we can compute that with a 20-percent down payment and a loan term of 10 years, your monthly amortization will be Php 25,785.84, which is definitely lower than the rental rate. But again, you have to consider how long you plan to stay in the location. If you tend to move from city to city for whatever reason, then buying wouldn’t necessarily be better even if monthly payments are cheaper.
But if you’re committed to buying, here’s a bit of good news: a lot of developers offer pre-selling properties at much lower prices, while RFOs (rent-to-own) are also sold with various incentives. Also, rent-to-own properties allow you to size up the rental by living in it for about a year before deciding to buy it, all the while putting in a bit of payment to purchase it through your monthly rent.
The decision of whether to buy or rent is one of the biggest decisions you’re going to make in your life, so don’t take it lightly. Sure, other people or the internet can put in their two cents, but don’t let them decide for you. Assess your current situation, your needs, and what you’re comfortable with before committing to anything.