Should I buy or rent a house?

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The decision to find a place to live is one of the most important decisions every family has to make. This decision becomes more difficult for young families, who may not have accumulated enough incomes to cover the cost of buying a home. So, families often find themselves in the dilemma between buying a home with a mortgage loan or renting a house.
Each of these alternatives has its advantages and disadvantages. The best way to understand the best decision between buying a house or renting is analyzing each option in details. Based on this, we will analyze the advantages/disadvantages of getting a mortgage loan against renting.
 
  1. Ownership
By getting a mortgage loan, you are making an investment at the end of which you will become the owner of this property. At the end of the credit terms, when all relevant liabilities to the bank have been paid off, you can use this property as collateral for a future loan. Whereas if you choose to rent a house, you will make monthly payments which are only expenses for you, and you will not own anything at the end of the period during which you are living in rent, as you are paying to use temporarily the landlord's house.
 
  1. Interest rates
Compared to other forms of borrowing, mortgage loans offer interest rates at which they tend to be lower compared to other ways of borrowing because the loan is secured through a real estate property. While a rented house is not affected by interest rates.
 
  1. Home Restructuring
By buying a house with mortgage, you will have your own home, that you can furnish and arrange as you wish. You can also make other investments in the structure of the house, for example you can expand a room and reduce another one without having to get approval from the owner. While for changes in a rented house, you must obtain the owner's approval. In a rented house, you will not have any incentive to spend money to design or fix the house, as every investment goes to the owner.
 
  1. Legal, tax and other costs
By buying a house with mortgage, you should also think about the costs associated with this alternative, as in addition to the principal, you will also have to pay interest, commissions, taxes, life insurance, property insurance, property valuation, real estate, legal costs such as notaries, mortgage, etc. Some of these costs are incurred only once, at the time of obtaining the loan, such as: the cost of real estate appraisal, legal costs, etc. As for renting a house, you will pay a certain amount each month, which usually depends on the area where you live.
 
 
  1. Maintenance cost
In addition to other costs, mortgage requires you to pay real estate taxes and house maintenance costs, as you are already considered to be the owner and these costs must be covered by you. In the case of tenancy, these costs are covered by the owner, as he is responsible for the repairs of the house.
 
  1. Initial investment
When decide for mortgage loan, you need to make sure that you have a sufficient amount of cash to afford a part of the purchase price of the house, as usually the bank covers only 80% of the value of the house while 20% of this value is paid by the borrower at the time of purchase. So, before you get a mortgage loan, you should have accumulated some savings, which will serve you to pay 20% of the house. In the case of renting, a prepayment is usually required, which can be equal to the monthly value of the rent.
 
  1. Fluctuation of the real estate market
The purchase of a house is affected by the depreciation of the real estate market, as this market has constant fluctuations. Over the years the value of your home may decrease as a result of the depreciation of housing in your area, even though the value of your loan does not change (it is almost 80% of the value of the property at initial time of the loan). In this case the best alternative is that of renting, due to the flexibility it offers in changing the place of residence or negotiating with the landlord for the price referring to the market price of the apartments in that area. While a positive revaluation of the real estate market will positively affect the value of your property purchased through the mortgage loan, as its value would increase and the owner would provide capital gain in case he sold it. In this case, buying a home with a mortgage loan would be recommended.
 
  1. Flexibility 
Mortgage does not offer flexibility in changing the residential area, as in addition to numerous procedures, it is associated with extra costs. If you live in a rented house, the value of the rent you have to pay at the end of the month depends on the area where you live and the value of the property in that area. This alternative is also more flexible when you want to change the house. Although every time you decide to change the residence, you will have to pay the costs of moving from one house to another, despite that these costs are lower or negligible. The tenant has more flexibility, due to the fact that the rent is usually short-term, while the mortgage loan is a long-term liability.
 
  1. Terms
Renting costs less in the short term. Funds that would be used to pay the 20% of the house purchase price can be invested in savings accounts which can bring you incomes. So, the benefits of renting are higher in the short term. When you will make the decision between buying or renting, you should consider that the rent is usually short-term, while the mortgage loan is a long-term liability.
 
 
To sum up, each of the alternatives has its advantages and disadvantages. There is no definitive answer as to whether renting or owning a house is better. The answer depends on your own personal situation, your finances, lifestyle, and personal goals. You need to weigh out the benefits and the costs of each based on your income, savings, how you live and then make the big decision. So, everything is up to you!
 
                                                                                                            Sara Shurdhi

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