Every person would want to invest in a home because having one feels good. It gives you the security of having a place to spend time with your family. This is one of the main reasons many people contact different types of real estate companies whenever they want to invest in a home. Renting is another way to live, and when you want to invest in a home, you can choose between renting or buying a home. If you have to make that decision, you must consider all the possible advantages and disadvantages of each situation, especially concerning your journey to financial freedom. Which option takes you closer to your financial freedom goals? In this article, we will reveal the pros and cons of the two living options so you may make an informed decision.
How Much Money Does It Cost to Buy a House?
To purchase a house, you must have at least 20% of the property's value in cash as your down payment. This is assuming that there is a possibility of you getting a mortgage that covers almost 80% of the value of the property. In addition to that, you will need finances to cover property transfer taxes and estate agency fees. You will also cover all the maintenance and repair costs of the home. This means that you are responsible for all the expenses related to maintaining the house instead of renting a home. Besides that, you need to be financially stable to take or even apply for a mortgage.
How Much Does It Cost to Rent?
If you decide to go for property rentals, you will need less initial capital than purchasing a home. You will be required to make security deposits which in most cases is between 1 to 3 months' worth of the rent. You will then be required to pay monthly rental fees. Besides that, you will also take care of utility bills like electricity, water, and gas. The property owner is responsible for all the maintenance costs and repairs of the home.
Advantages of Buying a House
Once you have established that your financial situation is good enough to purchase a home, you will enjoy the advantages below.
1. Seen as a Good Investment
Whether you decide to live in that house yourself or rent it to get passive income, having a property can be a good investment in terms of capital appreciation. The property's value appreciates in time, which means you will have a good return from that investment. Purchasing a house as an asset is likely to yield a return despite having lower risks. It is, however, essential to understand that the choice of that property is critical, especially when it comes to location and quality.
2. Current Market Conditions Are Favorable
Currently, financial institutions have increased willingness to provide mortgages at a lower interest rate. Purchasing a home today can be straightforward because of how affordable they have become. If you have enough finances, investing in buying a home will be the most significant investment you will make.
3. Possibility to Customize
Once you have purchased a home, you can renovate it to your preferences and style. This is an advantage compared to rental properties where you do not get that chance of renovating to fit your preferences.
3. The desire for Stability and Security
There is a lot of security that comes with having a house of your own, and having the psychological safety that you have your own home is something you want to enjoy. Most people often want to leave an inheritance to their children, and purchasing a house can prove good. According to most people, stability can only be measured if people have the property of their own, which is possible when you have your own home.
Advantages of Renting a House
Whether you may not have enough funds to purchase a home or wonder whether you should go for rentals, some benefits are associated with renting a house.
1. Not Immobilizing Your Capital
You don't require excessive money to rent the home compared to purchasing a house. This means that you will free up the capital that you will use to invest in other areas.
2. Ensures Greater Mobility and Ability to Change Where You Live
Whether you live in the city, neighborhood, or house, renting allows you to move relatively quickly, especially when you need to change places of residence. You only need to provide notice as laid out in the lease agreement. It will be difficult for you to change your residence if you purchase a home compared to when you rent one because changing would mean buying another home which can take more time and may cost more.
4. Less monthly expenses
It will be complicated to estimate your monthly expenses when you have your own home because of having to deal with unforeseen expenses like structural maintenance that can sometimes be burdensome. This is not the case with renting a property because the owner incurs the costs. All you will have to do is make rental payments which you can plan for. One more benefit is that you don't have to bear the costs associated with purchasing the property like commissions to the real estate company, sales tax, or even the cost of taking out a mortgage.
Final Take Away
You probably may be looking for a definitive answer on buying vs. renting a house. Which one makes you more financially free? The answer is dependent on your situation, especially your lifestyle, your finances, and your personal goals. Renting can be a predictable expense, and therefore you can plan upfront. On the other hand, owning a house can prove to be an excellent investment in the long term, and therefore, the decision to own or rent will depend on your financial situation in your personal goals.
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