To buy or not to buy? It’s a question that every potential home owner finds themselves contemplating in the small, dark hours of the night. Taking on the responsibility of a 30 year mortgage and all the taxes, levies, maintenance costs and the prevailing uncertainty of housing market fluctuations that accompanies it, is for many too much of a price to pay. Then again, there’s nothing more disheartening than feeling like you’re flushing your hard earned money down the toilet and straight into your landlords pocket at the end of every month. Both alternatives contain their respective advantages and disadvantages and the answer is never going to be the same across the board.
Home ownership can be a rewarding and very worthwhile investment, especially if you’re looking for the kind of long term security having a place to call your own provides.
- Build Equity: Provided your home maintains its value you will be building equity with each payment you make. Generally homes rise in value anywhere from 4-6% each year, so if your property does rise in value and stays ahead of the prevailing interest rates you will have made a worthwhile and potentially very profitable investment.
- Predictable mortgage payments: Opting for a fixed mortgage payment plan will ensure that you won’t be slapped with any unsuspected rises in your principal and interest rates. You will be able to stick to a clean, clear and predictable payment plan for the duration of your mortgage.
- You be the landlord: There is always the option of buying a house and renting it out at a higher rate than your mortgage. This way your house pays for itself and you could end up netting a tidy profit over time.
- Creative freedom: If you have a predilection for home improvements then having your own house is like having your very own lifelong makeover project. There’s no kowtowing to the whims of landlords or drawing up lists titled ‘101 thing’s I’d do with the place if it were mine.’
- Maintenance costs: Unless you’re a free spirit who considers rain leaking from the roof as nourishment from the heavens, your home will require regular upkeep and maintenance. Pipes burst, roofs leak, wiring wastes away and paint peels. All of this costs time and money (sometimes considerable amounts) to repair.
- Heed the taxman: As a landowner you will be taxed on your property. If taxes go up it could make it harder for you to make the payments on your mortgage.
- What goes up can come down: There is no guarantee that your home’s value will appreciate. In fact, many woeful tales can be told by homeowners whose house values depreciated over time leaving them hashing up a resume at age 70, and not as was the initial plan, enjoying their retirement and sipping cocktails after a delightful spell on the bowling greens.
Not to buy
If you value freedom and flexibility and would rather remain untethered to the long term commitment of a 30 year mortgage then renting could be the ideal solution for you. But then again, it is not without its share of promises and pitfalls.
Limited liability: One of the biggest conveniences of renting is that maintenance costs come out of the landlords pocket and not yours.
Wherever you lay your hat: Unlike if you buy a house, renting affords you the option to pack and move with relative ease. So should you find that a lead footed leviathan lives upstairs and has a penchant for 3 am drum solos, it’s much easier to sublet and move than if you actually owned the place.
Risk free: If the market suddenly takes a nosedive you won’t have to worry about hanging on to a depreciating asset.
Rising rent: You’re not totally off the hook from the tax and insurance liabilities homeowners face, because if the landlords costs go up it’s a safe bet that the rent will be raised too.
You don’t build equity: Your monthly payments will secure a roof over your head but that’s about it. When you move you’ll have nothing to show for it apart from some fond memories and the knowledge that you’ve helped pay off someone else’s asset.
Cage your creativity: Regardless of if you’re a home makeover maverick, when it comes to doing the place up you’re at the mercy of the landlord – even something as simple as hammering a nail into a wall requires their stamp of approval.
Overall, the decision to rent or buy a house all comes down to the specific needs and financial capabilities of the person doing the choosing. Sometimes it may be in your best interest to rent for a while longer until you find yourself in a better position both personally and financially to make the long term investment of buying a home. It’s always a good idea to make a comprehensive overall appreciation of your circumstances as well as running the numbers in terms of calculating the mortgage repayments you’re likely to pay before making your decision.
Toby Adams is a professional copywriter based in Auckland, New Zealand, who enjoys writting about a wide variety of topics including travel, finance, health, education and much more.
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