Some say that it is a great feeling to own a house. It gives them the pride, honour and joy that they deserve. To others, renting a house is a better option as they can move out if it doesn’t suit them anymore.
Investing in your own house is probably one of the biggest investments that you will come across in your life. The house will forever remain as an asset for you. The peace and freedom that you will earn for you and your family is incomparable. Going for a housing loan is one of the easiest ways to own one in today’s world. Banks offer attractive rates of interest with housing loans and it is very easy to repay the amount in monthly instalments. However, when you rent a house, you will have live by the terms set by the landlord. You won’t be able to remodel your house if you want without the prior notice of the owner. But you can choose to move out whenever you want.
Let us know more about the advantages and disadvantages of both owning and renting a house.
Advantages of owning a house
- Building Equity – The value of the house rises every year. Do not worry even if the house has no substantial increase in its value. The equity that you build by clearing the payment for your mortgage will definitely prove to be advantageous.
- Stable Housing Payments – When you select a mortgage with a fixed rate of interest, the principal amount along with the monthly interest remains the same throughout the entire tenure.
- You can use the house as an investment – If you plan to move from your house to a different one, instead of selling it, you can rent it out. This way, you will be able to generate income from that house over a longer period. You can also choose to use the rent that you earn to cover the mortgage. So, if you have a home, there is a good chance that you will have a rental property in the future.
- Settling in a community – When you purchase a house for you and your family, it is plausible that you get involved in the community as you are going to be a resident for years. You can get familiar with your neighbours and join the homeowners’ association. As a part of the association, you can come up with ideas that benefit the local school and community.
- Decorating the house as you wish – Home ownership can give you immense joy, and the freedom to change the look of your house as per your choice and convenience is definitely a great pleasure. Change the environment of the house that suits your taste. Yes, if you are living in a homeowners’ society then you will not have that much freedom. But no one will stop you from painting your bedroom purple.
Disadvantages of owning a house
- Paying for maintenance – When you purchase a house, you must dedicate time and spend money for the maintenance of that house. It might need changes or repairs from time to time and you must have sufficient funds to tackle such situations. Some money should be kept aside for emergency situations like replacing a broken window, changing an appliance that broke, etc.
- Cash Investment – If you are planning to buy a house you must understand that it will require a lump sum amount for the down payment. There will be several other expenses associated with it. So, a huge chunk of money will not be there for you to put into other investment options.
Advantages of a rented house
- Less or no maintenance – When you stay in a house, whether you buy it or take it on rent, you have maintain the basic cleanliness of the house. However, for bigger issues like leakage in the pipes or a crack in the ceiling, you will not have to pay anything for the repairs. You can let the landlord know and the problems should be taken care of.
- Easier to leave – You can choose to vacate the house anytime you like. When you change your company and join a new organisation, you might need to relocate. Considering that you stay in a rented apartment, it is much easier for you to move from one house to another.
Disadvantages of a rented house
- Increase in monthly payments – When you stay in a rented house, you are always at a risk of paying more rent after a particular period. The landlord may increase the rent amount at the end of the lease period. Then you will be liable to pay a bigger chunk which might lead to financial problems in your life.
- No equity is built – When you stay in a rented apartment, all you have is a place to live. You are not building equity at all. When you are ready to move to a different house, you will have no asset for selling.
- No tax benefits – When you have a house of your own, you can avail some tax benefits. But when you are a renter, then you will have no benefits or deductions on housing expenditures.
- You cannot remodel or paint the house – Rented houses have quite a few disadvantages. Since, you do not own the property, you cannot change the look of the house. You will have to consult the owner of the house if you want to change the colour of a single wall, let alone remodelling.
It is quite evident that going for a housing loan in Philippines and owning a house can be far more beneficial than staying in a rented apartment. One must understand that purchasing a house involves a lot of money. So, the decision must be taken wisely, after a lot of research.
Buy a house when you intend to stay there for at least five years – If you are spending a bomb while purchasing a house, it is advisable that you stay there for a long period. This will help you recoup the expenses you incurred while buying the house. If you are planning to move to a different city, say Davao or Cebu, or to some foreign land, in less than five years, then it is better that you go for a rented accommodation. It might happen that you have to relocate for a job change. Then buying a house is not a great idea. However, if you are planning to settle down and have a family soon enough, then a rented condo with one bedroom might not be the right choice for you. You can plan to buy a house in that case. Since, purchasing this property will churn out a lot of cash from you, be sure that you are going to use it for a fairly long time and make proper use of it.
Look at non-financial aspects – You might purchase a house now, and down the line, you might find out that the increased value of your house has not been able to maintain pace with inflation. Well, look at the non-financial aspects of that property too. Purchasing a house or an apartment for you and your family makes perfect sense as it gives you freedom and stability. Even if it is not the best bet from the financial point of view, but the independence that you can enjoy in a house that you own has a pleasure of its own. You don’t have to pay rent to anyone and you are not answerable for making changes to your house.
The price to rent ratio must be lesser than 20 – If the price to rent ratio for the price of the house market is lesser than 20, then it is a good idea to purchase rather than being a renter. The price to rent ratio helps you to understand if the cost of homes around your locality are priced fairly. When the price to rent ratio goes above 20, it means that the monthly costs of owning a house will be exceeding the rent expenses.
Financial-use aspect to be taken into consideration – When a house is purchased, it offers returns in the form of personal use and investment. This suggest that the owner of the house can stay there and avoid paying any rent to anyone. Also, you can choose to sell the house at a later point and earn a lump sum return. As we all know, that mortgage payment is a fixed and finite thing. Rental costs can increase any day. Finally, when the mortgage is completely paid off, it leaves the owner with a rent free residence that can be enjoyed for an entire lifetime.
Now, with everything on the plate, the final call remains yours. If you have the resources and you are planning to settle down at a place, then the advantages of owning a house clearly wins over being a renter. Buying a home is a big step, so be careful and choose housing loans wisely.
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