Buying or Renting a Home
Category Una's Scribble Pad
Both options have their advantages and disadvantages, for example renting allows you more expendable money in the short term, while owning a house gives one a sense of security as it is considered a long-term investment.
Buying
- Homeownership brings both tangible and intangible benefits. Not only do you have your own home, you can make decisions about the look and design of the space, but you also get a sense of stability and pride of ownership.
- You have the option of buying to rent which enables a Homeowner to generate income from renting out the property. This income can be put towards a home loan.
- Owning a home offers the long-term benefits of security, equity and potential growth in personal wealth
- The overall cost of homeownership tends to be higher than renting even if your mortgage payment is lower than the rent.
- Rates and Taxes
- Maintenance and Up-keep
- Levies if in an Estate
- Home insurance
- Mortgage interest can make up nearly all of your monthly payments in the early years of a long-term mortgage. It can take as many as 13 years before more of your payment goes toward the principal balance in a 30-year home loan.
- A Homeowner runs the risk of not making any profit through resale. This is often caused by economic factors such as a recession or high-interest rates, or simply through a particular location becoming less desirable.
Renting
- The biggest myth about renting is that you're throwing away money every month. This is not true. After all, you need a place to live, and that always costs money in one way or another.
- When you rent, you know exactly your housing costs each month. This amount is indicated on your lease so you can plan accordingly.
- As a Tenant, there is the possibility of living in an area in which you could not afford to buy.
- As a renter, you may face rent increases each time your lease is up for renewal.
- Renting means you're able to move whenever your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell (that is now at the end of the lease agreement term).
- A Tenant is bound by the rules of the lease agreement, which can impact the freedom to use or renovate the property.
Upfront Cost |
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Renting |
Owning |
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Admin fees Electricity and water deposit A damage deposit of one month's rent (refundable - if everything is in order at the end of your lease term) One month's rent in advance
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Deposit (optional) Transfer duties Conveyancing fees Bank fees Estate agent fees Property registration fees
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Monthly payments |
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Your rent is subject to an increase every 12 months, usually between 8% and 10% Water and electricity Home contents insurance Maintenance costs and building insurance are the landlord's responsibility.
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Your repayments are fixed, but you can reduce the interest with extra payments. Rates and taxes or levies Water and electricity Home contents insurance Building insurance Home loan protection plan Maintenance costs |
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Author: Una van Jaarsveldt
