Own a house or rent one? Quick survey!

[avikz]

Hi guys, I am trying to understand certain psychological parameters of young tech savvy generation when it comes finance with responsibility. The question is simple,

Let's assume you make 100 USD salary every month. You can buy a house through mortgage loan and your monthly payment will be 40 USD and that is a long term commitment.

But you can also take a house on rent where your monthly outgoing will be 15 USD. You are free to leave and move to another house anytime you want.

What would you do? Explain your reason.

Imp: I need your answers based on your current location, socio economic scenario, job security, financial backup etc. You don't need to share these details but consider this real life details while making decision.

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[jackg]

Can you confirm the length of mortgage because mortgages are normally half of rent costs in the UK over a 24-26 year term.

If renting is cheaper than a mortgage it might make sense to work out how much you're paying on a mortgage compared to rent.

For a mortgage at 4%, the 15$ rent and saving/investing in stocks or a local company with $25/month might be better

That being said, you'd probably put in for a 26 year mortgage and pay it off much earlier, but imo you're better off saving at least 12 months of mortgage payments as a rainy day fund before paying of the rest (even if everything is insured).


Based on the UK metrics, if you're staying somewhere for up to 3 years, renting is the best choicee to make unless you're buying with cash from an online estate agent.

Mortgages are good if you're staying somewhere for more than 3 years as you should build enough equity in that time.

Getting approved for a mortgage is normally the hardest bit though as it's normally 3x-5x earnings + a 5% deposit.

Individually, the average salary gets you a mortgage of £185k, while the average house is worth £350k...

[mu_enrico]

I'd rent for 15% of my salary instead of 40%. Yes, I'll get a house if I manage to survive with 60% of my salary. But, in reality I'll be extremely miserable if I take the loan path. Who knows, I'll be sick and die in vain before I get the house certificate.

I don't have a problem with loan, just trying to be realistic. Also, wise man says "don't spend over 20%/month for a loan."

[Lanatsa]

Just basing up on the situation given or just simple talks about 40% of your salary for it to be used solely for mortgage for long years which is usually talking about
20-30 years based up on the country where I do live.

For me I cant really risk that out on having only 60% left on my salary and heck, you wont know on what future brings because no one can really guarantee that you would really be working on the same company for more 25 years.

So its a bit of a risky if you dive in with this option even though mortgaging is really something you do end up on having something rather than on purely renting
but you should mind about those "what ifs?" along the way.

[stompix]

Hi guys, I am trying to understand certain psychological parameters of young tech savvy generation when it comes finance with responsibility. The question is simple,
Imp: I need your answers based on your current location, socio economic scenario, job security, financial backup etc. You don't need to share these details but consider this real life details while making decision.

Your example is not really matching anything I would know of but here is one personal example here from where I used to live
The rate of the two-bedroom apartment was 600 euros, the cost of the same apartment was around 200 000 euros, in both cases full furnished (that's a lot, trust me), taking into account interest, on my current mortgage is close to nothing, you would pay it up in around 30 years of rent. Of course, it sounds a lot, but you should really look back after 10 years of paying rent, you have paid in this case 72 000 euros and you have...what? Nothing! At least in the case of the mortgage, you can sell this to a buyer and he will continue paying the rates but you at least end up with what you've already paid! And one more thing, if a house would be that expensive to be covered in like 100 years of rent to full price, why would the owner choose to rent and not sell? It would make no sense, right? Same for a house that would be paid up in 10 years of renting, why would anyone rent, they would go straight to buying.

I did rent for 2 years when I moved away from my parents, at the end of those years I realized that it has been a mistake, If you plan to stay in the same city for a longer period or for life, once you have a stable job renting makes no sense to me. Of course, there are different cities and different prices but from what I can see around here if we cut out city centers and resort cities, excluding Germany which as usual does stuff on its own way, buying is way better.
In your case the sums seem a bit arbitrary, the option of paying 15$ in rent and the mortgage at nearly triple...probably at this point where the mortgage is that big, I would take into consideration a home further away, thus cheaper. But if there is no option then probably I will choose rent too till I can get out of that place!

[jossiel]

It actually depends on your situation. If your work is changing location from time to time and you have to relocate and you truly like your job then renting is the option for you.

But in the long run, owning your own house is still the best option. You have the value of appreciates yearly until you finish paying it. You can eventually sell it as a good profit margin or rent it or stay on it and you don't have anything to think about mortgage when you're done paying it.

[Cling18]

As for me, I would rent a house first because I think the remaining 85 USD wouldn't be enough to sustain myself or my family's necessities. I'll use the time frame of renting in saving enough for me to buy a house when I could completely afford it. It's really important to have your own house but we have to be financially prepared to build or buy one.

[meser#]

First of all im single person and my first choice would be living in parent. It will save from monthly rent and bills like electric, water, internet etc. But if I have to live own by own it would be renting house not buying. Because that house might be perfect for me but in the future its not fit to my family. It will cause extra payments to me. When i get married and have kids definetelly I will buy a land than build our house on it. But if my bank account digits not enough than I will use mortgage to buy house.

Why do i think like that?

We can think of all of us as seeds. When we are seeds, we move from small to large pots, sometimes even our soil changes. When we grow up and become a tree, we must root our roots in the most appropriate place. Then we can live a happy life.

Family is more important than money. The shroud has no pockets

[just_Alice]

In a situation you've described I would take a rent. Recently I had to make a similar decision and I chose to rent because this makes you a free person. Mortgages take years to pay off and you're basically stuck with the place you've chosen for all that time, and for me personally, that's an issue, because my work can entail moving to another country for better career options in the future. Also, apart from my own earnings, I don't have any additional backup and financial support, so a mortgage is a risky option and would require limiting spendings significantly.
In another case, if I wanted to live in a certain place for the next 15 years and the financial situation was more stable I'd chose a mortgage because in general, it's a more rational option.

[Darker45]

Honestly, I don't want to be paying a loan for 25 or 30 years just to have house. I'd rather save and invest and look for alternative sources of income to be able to build myself a house without getting a loan to be paid for almost a lifetime. That may take a decade or two, it doesn't matter.

But as far as my locality is concerned and its socio-economic situation, only a few minority could do this. The huge majority will have to apply for a housing loan to be able build a house. Majority of the working class in my country cannot avoid getting loans every time they buy something expensive like a car or a piece of land or a house.

[bittraffic]

If owning a house means not paying monthly then that's better than paying its mortgage every month, that's simply the same as renting.  If I wanted to settle in a place,  I would rather be buying a 300sqm lot and build a small cabin there to avoid renting. But If I have to choose I guess I'd rather be renting $15 a month so I have an option to just drive away. It's a good time to buy a house but prices are inflating.

[killerfrost]

Depending on where you live, buying or renting will give different results, in the country where I live, most people see a house as an asset that cannot be changed. But I have a simpler thought than this, because the choice of buying or renting is not so important to me. Depending on the way of thinking, I also bought myself some apartments but with the purpose of doing business and using it to rent to others, that is also a way that I can maintain the things that I'm doing.

[barbara44]

I will pay $40 every month and manage myself with a smaller budget because I see value in paying $40 since it will one day own me the house and paying rent means I am getting nothing in the long run. I would actually save and pay my mortgage faster to avoid the interest, if applies.

Maybe it is because of the place I live at, it is possible to manage within $60 and some western countries might pick the renting option because they do not want to compromise with their lifestyle. But I don't think paying $15 every month without any kind of goal is worth it. Just by paying $25 more, I am securing a property and the value of that house would be also massive by the time I acquire it.

[Kittygalore]

You have to look at it in the long-term, if you think that you are going to spend more money doing mortgage on a house in 10 years compared to renting a decent apartment in 10 years then you could probably see that renting will be for the better. Maybe in that 10 years, you can save up to buy your own house.

[john_nautica]

Owning a house is much better since you would be able to give it to your child soon and of course its a permanent one not unlike renting an apartment and moved to another one it's a lot of work and you don't actually own anything unlike with owning a house it can considered as your asset. I think it still depends on the person but for me I choose to own a house rather than to rent one.

[amishmanish]

Owning a house depends on a lot of factors. For me, it was a no-brainer considering that it was a first home for our family including my parents. If i had the option to consider this as an investment, for example in cases where your father has already built a house in a decent enough city, I'd definitely accept the mortgage on one of those city apartments that have re-sale value. (Re-sale value is of course something you have to judge depending on country, state, locality).

The 40% payment of your present salary may seem higher but you have to bet on your own future growth. Be optimistic damn it, its a free market. That 100 USD you earn will soon become 120==>160==>200 USD and then the 40 USD payments wouldn't seem much. In such a case, I'd advise to increase the monthly installments and reduce the re-payment tenure. Make sure to check the pre-payment terms on your Home Loan so you can make big payments once in a year to cut down the Principal in the initial years. (If you don't understand this, then amortization will end up costing you a lot more.)

My verdict, A 15$ rent versus a 40$ mortgage payment to "own" a house, is a no-brainer imo.

[djcaoile1205]

Own is always better if you are planning to live therre for 10+ years

[inanilujimi]

I prefer to rent a house instead of having to pay home loans up to almost 50% of my salary, of course it is very financial torture that resists the desire to own something because I don't want to make life difficult for myself, it's much better to collect the available money first, to buy the desired house one day.

[pinoycash]

Buying a house can be considered as a liability rather than an asset, So once you buy a house it will further drain more money on your salary specially if you took the house via housing loan.

Renting is good for short term specially if you only earn enough for yourself. Only buy a house if you can earn a comfortable income every month.

[Oasisman]

We'll if you say I'd spend 40% of my salary to pay for a loan to own a house, then why not?
Especially when you got stable job. Infact, 40% deduction of my salary isn't too much when you have a working wife like me.
Come to think of it, you're paying $15 for how many years and gets absolutely nothing in the next 20-30 years. If you're not planning to build your own family then renting would be fine.
But If you're planning to have one or you already have one, it's always better to have your own house.
At the end of the day a $40 payment would mean everything to you and your family.