Choosing to rent or buy a home on mortgage is a major decision that affects lifestyle and financial health.
Most of us can’t wait to get on the property ladder – right?
But to buy(mortgage) or Rent, that is the question.
Buying a home is indeed an enormous investment for most people. So, it is important not to rush into a hasty decision but make a well thought out and planned decision.
However, it is believed that in the long run, buying your own space usually offers better value than renting as owning brings emotional connection and a sense of stability that renting won’t bring.
Buying versus renting a home is a very individual decision but,
If you are on the fence and can’t decide, read on to get an insight on how Mortgage or owning is anytime better than renting.
Mortgage vs Renting
Let’s be honest, buying a home, or an office is no petty expense. Owning comes with a lot of responsibilities – large upfront costs, paying a deposit, legal and mortgage set up fees, recurring property taxes and insurance payments along with the cost of maintenance and upkeep.
Whereas Renting is known as Dead Money as despite paying the rent every month, it doesn’t give you anything back. However, it is flexible and requires fewer responsibilities.
Keeping those costs aside, mortgage repayments are generally similar in rent but have humongous benefits beginning with gaining equity, thereby diminishing monthly outgoings each month. Let’s dive in for more benefits and comparison;
- As we know, mortgage encompasses debt and the interest, with each month’s repayment, there is a substantial decrease in the interest. So, monthly repayments get tiny as we head closer to finishing the mortgage repayments, thereby becoming the absolute owner in contrast to renting. You will only be a tenant despite paying the rent for months.
- So, the funds paid towards repaying the mortgage provider also go back into the home in the form of investment. This means one can potentially make a profit if the property prices rise or use the property as a guarantee to get a loan or use it for future passive income (renting extra space or home), which is not possible in the case of renting as all the rent payments go to the landlord without any long-run benefits.
- Mortgage payments can fluctuate, i.e., increase or decrease from year to year as the interest rate can change from year-to-year after an initial fixed-rate period. Still, with rent, payments can bounce considerably from one year to the next as the landlord increases the rent by a certain percentage every year.
- A mortgage has a multitude of tax benefits as it includes interest payments, i.e., the cost of financing. In the early years of a mortgage term, one pays towards reducing the interest due on loan, and then luckily can reduce/cut down the mortgage interest payments to reduce the taxable income. Still, this deduction isn’t an option with rent payments.
- Mortgages include homeowner’s insurance, whereas renters don’t have insurance, so are not shielded in the event of fire or theft as a landlord’s insurance policy doesn’t cover a tenant’s belongings.
Now, few more privileges and perks for the owners in contrast to the tenants.
- Owners will have more rights and can spend money altering fixtures, modifying and thereby improving the home and increasing its value without the landlord’s permission.
- Soon after paying off the mortgage, one can live in their home for free and set up for a comfortable retirement. That’s not something you’ll ever be able to do as long as you’re renting.
- Owning a home allows you to build wealth to purchase future homes as their homes gain value, and buying could also increase the net worth in ways renting can’t.
As we all know, due to the pandemic mortgage rates have fallen to an all-time low. So, it’s worth looking at the average costs and various options to help you own your home or office. We at My Mortgage Consultant in association with Mortgage Alliance can help you decide which option is best for you and make the entire process hassle-free and seamless with our experienced and professional financial experts.