Would you rather rent or buy a house? This is the most pressing issue nowadays. However, the right answer lies in the person’s particular circumstances, such as the current financial situation. For one, the pandemic has exhausted our savings and emergency funds. This also took a toll on people’s decision to buy a house and rent for a couple more years until they fully recover financially.
Let’s take a look at the pros and cons first. This is the necessary first step so you won’t fall into the common renting or buying pitfalls.
Should you rent a house?
Yes, rent now
Renting requires no maintenance. If something needs fixing, you simply need to call the homeowner’s attention or the property manager’s to arrange with the in-house or local plumber, electrician, etc. Importantly, you need not save for the upkeep fund because the owner is the one to save for it.
Moving to another place is easier. If a career-oriented relocation opportunity presents itself, you may grab such an opportunity without having second thoughts. You can move out anytime you want! Also, you can save yourself from the hassles of selling your home.
A house can be a depreciating asset. With the subprime crisis of 2008 in mind, it isn’t guaranteed that a house will increase in value in the coming years. There are many factors at play, including its location. On the contrary, house value appreciation in the Philippines remains relatively stable despite the health crisis.
No, don’t rent
Money rental fees are rising steadily. In many cities across the country, monthly rents are increasing. Negotiating the rent is possible, but you can’t count on it. The rent may increase immediately after finishing the current lease contract.
There’s no way to build equity against the property. The house can only provide you a place to live. Thus, it cannot provide you with a salable asset if you want to move out of it.
Limited interior design choices. In making changes to the apartment, you need to first obtain the owner’s permission, especially if you want the place repainted. Approval may be lengthy, too, depending on who is involved in the decision-making process.
Should you buy a house?
Yes, buy now
Building equity. Historically, residential properties rise in value between 4% and 6% annually. So even if your property is not increasing its value, you can still build equity upon paying the monthly amortization.
Monthly repayments are relatively stable. For fixed-rate mortgages, monthly amortizations stay the same throughout the loan tenure. Only the property tax and home insurance change from time to time.
Settling in a community. Homeownership may also mean deeper involvement in your community because you’d know that you will be staying there for many years. Your actions are often geared toward making your community a better place for everybody.
Decorating as to your heart’s content. Basically, you have the freedom to style your house any way you please.
No, not too fast
Paying for own maintenance. Costs of upkeep are all yours to shoulder. Also, you need to save money to cover unexpected repairs.
Home as illiquid assets. If you face the need to relocate due to an unexpected change in circumstances, selling your home is not easy. Even if you sell it, you won’t be able to rake in as much money as you want.
Buying requires upfront payment. Definitely, you cannot buy a house without a down payment. In addition, there are other related costs such as closing costs, documentation, etc.
Home insurance is required. For mortgaged properties, insurance is mandatory. The majority of lenders in the Philippines require that the borrower insure the property. Paying monthly amortization along with monthly premiums is rather difficult.
Evidently, there is value in renting or buying a property. However, homeownership is a long-term commitment; hence, it is not for everyone. Renting, on the other hand, is more lenient to short-term goals. Therefore, it is a matter of decision depending on which can provide you with a more cost-effective solution.