One of the most significant moves you’ll take as a young adult is moving out of your parents’ home and establishing your own. If you’ve saved up enough cash to finally make the move, you’re probably wondering if you should rent or buy. It depends on a variety of factors, like your budget, future living plans and the current real estate market condition.
Opinions among your friends and family may also be different. Your peers may say that renting is the better option for now. You’re still young and owning a home is expensive. You may as well save up for now. Plus, you don’t want to waste your weekends worrying about your home’s maintenance and utilities. Your older and more experienced parents may suggest buying if you can, as owning is a long-term investment that can always give you a good return. And it’s never a bad thing to have a tangible asset you can resell.
Try to tune out these opinions for now and focus on your needs and preferences. Both options are completely viable.
Here’s what you should consider before making your mind up for this important decision.
Your Budget
This is the most important factor in your decision: determine what you can afford. Before you shop around for homes that are on sale, take time to look at your finances. You’ll also need to factor in your current expenses, from payments for a student loan to current utilities.
How much have you got saved up? How much can your current credit score allow you to borrow? Can you make a down payment now without applying for a loan?
Apart from the down payment, you need to figure out if you can make the mortgage. A rule of thumb for any home buyer is to not exceed 25 percent of your gross monthly income on mortgage payments. If you go beyond that and you have other debts to pay, you may struggle to make your mortgage. When you do, full ownership of the home you purchased on a loan could be in jeopardy.
Unless you somehow won the lottery, have a high-paying job or business in your 20s, or have loaded parents willing to sponsor you, you may not have the millions of dollars needed to buy a premium home in a premium neighborhood. If you want to afford to own a home, you have to resort to getting a home loan. These have payment terms of about 20 to 25 years. You also have to pay interest to the lender, which means you’ll end up shelling out significantly more than you would if you paid the full amount.
Renting is much simpler to budget. You don’t have to worry about the final cost of the place since you’re not going to own it. You only have to think about paying monthly rent. This is why renting is a popular choice among young professionals.
Current Lifestyle
Your choice should also depend on the lifestyle you have right now. Does your job require you to travel a lot? Are you constantly busy with work and go out on weekends? You may not want to commit to your own property yet, as you won’t be able to maintain it yourself. The flexibility of renting is what you need.
If you already have a family, buying is a great choice. A lot of houses in the Philippines are located in subdivisions, which provides a comfortable break from the hustle and bustle of the city. You also get better privacy, as you won’t be sharing your walls with other tenants.
Future Plans
If you plan on staying in a neighborhood or job position for life, then owning a home in that area is a great choice. Renting is just inefficient if you do it for decades. You could’ve paid off a home loan by that time. Conversely, if you have plans of exploring job opportunities in other cities in the future, consider renting. This way, you have more flexibility when it comes to moving. Selling off your own home when you’ve only lived in it for a few years and buying and moving into a new one is a pain to do.
The decision to move to a new home is one of the most significant decisions you’ll make in your adult life. However, like many other young professionals, you may be confused whether you should rent or own a home right now. Consider these factors when making your decision and you’re sure to have zero regrets.
