Many people believe that buying your own house or condo will always be better than renting a place to live. They say that the money you spend every month would be better off going towards paying for a place that will be your own in the end, rather than for a temporary living space that won’t be yours when you stop paying for its use.
Why do people believe it?
This belief is common because purchasing your own property does have its own set of advantages.
While you will be the one to shoulder the cost of maintenance, you will also have real estate that you can sell or rent out for additional income, if you need it. You will also own a place that you can pass down to the next generation. Plus, there is a chance that the value of the property will rise over time, allowing you to profit in case you decide to sell it.
Also, when you buy a house or condo, you will be the one making the final decision for most things. When you rent, you must agree to follow the rules of your landlord, and you probably won’t be able to do any major renovations or makeovers.
Further, since rental happens on a contract basis, there is also a chance that you will not be able to renew (especially if the landlord has other plans for the unit that you’re renting). In situations like that, you’ll end up having to look for a new place to live that fits your geographic preferences and budget. This wouldn’t happen if you were the property owner.
Risks of believing this myth
While there really are advantages to purchasing property to live in, it isn’t always the best thing to do. Remember that, once you are the owner, you will have to shoulder the real property tax every year (for Metro Manila, this is 2% of the assessed value of the property).
The permanence of purchase is another big factor. This will tie you down to a certain area, which may not be ideal if you have the sort of work that may require you to move around frequently.
Also, the cost of any repairs or improvements will come from your pocket. If a door needs replacing or a sink gets blocked, you will have to shell out money to get those fixed.
Perhaps the single largest factor is the cost of buying a home. The difference in the amount you would need versus just renting will always be substantial, and one that you should be completely ok with spending. This also requires a long-term commitment, especially if you will be taking out a loan for it.
Verdict: It depends.
While there are definite advantages to buying your own place, there are some things you should first consider.
If you don’t plan to stay in that location for a long time, if you will have a hard time financing the purchase and if paying for maintenance and real property tax will be difficult, then it might not be the right choice to make. Look also at your current state and priorities to see if you should take the leap.
Remember, though, that you can always rent first while saving up for a property of your own. Getting a loan is also an option (this is actually an example of good debt, as long as you can afford the monthly payments in full).
Whether renting or buying, experts recommend that you only spend 25% of your monthly income on housing, so keep this in mind when figuring out your budget.