One of the most basic questions when you’re getting yourself a home is wondering whether you should buy the home, or rent it. Which is more cost effective? Which makes the most sense within your given situation?
Which of the two will save you more money in the short-term?
In the long term?
Typically, you have to decide whether to buy or rent before you go looking for a home. Homes are either on the market to be bought, on the market to be rented, or on the market for both. It depends entirely on the seller, landlord or firm owning the home.
There are a couple of things to consider before deciding what you need. Of course, renting seems more cost effective at first in the short term, but there are more to consider when your options are wider. For example, when your financial situation allows it and your credit rating is good enough, you can apply for a loan and look for houses for sale on sites like Property Guru.
Loans can let you buy houses and then gain ownership over them through monthly mortgage payments, which are set by a bank or loaning company, in addition to monthly interest.
To go more into depth:
A Mortgage Is Technically More Valuable than Rent
On first glance, rent is money you give to a homeowner in exchange for access over the home. You get to live in it, take care of it, and so on. But nothing really changes in your own personal value – you simply have a roof over your head now.
It’s different when you get a mortgage loan. Mortgages and interest paid monthly gives you a percentage of your home each time – meaning, as time passes and you pay off your loan plus interest, you gain ownership over your home until eventually it’s yours entirely. And over that period of time, you still have all the usual rights of home ownership – including the ability to raise your home’s value through improvements and such.
Renting Allows You to Be More Flexible
When you buy a home through a loan, you’re typically stuck to the payments. Even if you decide to move away to a different home, you still have to pay your monthly mortgage until the home is yours – you can’t just evacuate and stick the whole thing in someone else’s hands, at least not simply.
When you sign a contract with a bank to pay regular mortgage, that contract is made official through the local notary. In some cases, you can go to a lawyer and announce that you’re drafting a contract to sell the home – the lawyer can then call the bank or loaning company, and based on the bank or company’s policies, you will be given clearance to sell the home as long as a cut of the sale goes to the bank, usually in the form of whatever mortgage payments left to be paid, together with the additional estimated interest.
All that combined makes moving from a home you don’t fully own extremely difficult – unless you’re paying rent, in which case you can either leave as soon as your contract or landlord permits, which is usually much sooner than with a bought home.
Not to mention the fact that you don’t have to find a buyer, first.
You Control the Value of Your Home Through Improvements
When you own your home, one big advantage is meant to be the ability to increase the home’s value as you see fit. You can buy your own house, and then, for relatively little cost, spruce it up and get a much larger return on investment in it – provided the housing market remains fairly stable.
You’re Actually More Likely to Save Money and Value When You Rent
One thing homeowners don’t realize is that, in general, when you’re renting out your home you may potentially be paying less (unless you get a great deal on your house sale), for several reasons. Yes, mortgage payments give you ownership over your home – but interest is simply paid to the bank as a way for them to make money out of the deal, meaning you’re effectively losing quite a lot as well.
That’s before homeowner taxes, the costs of upkeep and renovation, and any other costs that landlords would usually shoulder in rent contracts.
As Mashable points out, not all costs are baked into the initial price tag.
When You Buy It, It’s Your Home
Renting a home means it’s not your home – you’re simply renting the living space within it. Depending on the landlord, this greatly restricts your freedoms in terms of what you can do with the home. Some landlords won’t let you drive nails into the wall of a home or apartment to hang pictures, some landlords won’t let you change the walls to a particular color, some landlords won’t condone pets of any kind – and the list goes on.
But ultimately, the biggest factor is upfront cost – and home costs are rising in Malaysia, as Global Property Guide points out. This naturally means many simply cannot afford to buy a home. All that considered, which are you going for?