To Rent or Own

Every adult longs for a space they can call their own, to establish their independence and enjoy their privacy. In general, there are two approaches to maintaining your own place; renting or owning. Everyone’s circumstances may be different, but we believe that in general, home ownership is the better option between the two. Let’s discuss how these two stack up against one another.

Pay Your Own Mortgage

We’re sure you’ve heard the adage “rent is dead money” before. It’s absolutely true! Rental payments are a major monthly expense, not an investment. When you pay your rent, you are paying for the privilege of occupying someone else’s property. Your rights to occupy that space expires as soon as rent is due again, so you must continue paying. This expense adds up over time. After renting for a year, you will have nothing to show for it, except the aging receipts!

Conversely, your monthly mortgage payments can be considered an investment because you own the property (which is an appreciating asset) and are working to reduce the outstanding balance. With each payment, you can be building home equity i.e. the difference between the market value of your property and the outstanding mortgage balance. After paying your mortgage, over time, you will build up enough home equity to apply for financing to do some renovation projects to increase the value of your home or just to personalise it to fit your unique tastes. You would never be able to do that with rental property because you do not own that asset.

In fact, when you pay rent, your landlord may even be using those funds to pay for their mortgage on the same property. In effect, you are helping them maintain ownership of that property. Why help someone else pay their mortgage when you could potentially use the same money to realise your own home ownership dreams? It’s possible that your landlord may even use your payments to upgrade your unit so he would be able to ask for a higher rent. As a renter, you are at the mercy of landlords because they own the asset. You can be asked to leave at any time or the gradual increase in rent may cause you to move several times to keep to your budget.

Pride and Stability

Living on your own is generally a liberating feeling but home ownership takes it to another level. There is a feeling of pride that goes along with owning your home. You don’t have to depend on someone else for permission to make small changes or even major upgrades. You set the rules and for the most part, are accountable to yourself only. That stability is very comforting in the long-term when you consider the number of moving parts and uncertainties that you have to contend with on a daily basis in the modern world. A renter has no such pride and is only temporarily secure.

Building Generational Wealth

As mentioned earlier, a home that you own is an asset, therefore, it can be passed down from generation to generation. It is a comforting feeling to know that you can leave your children a valuable asset that will live on long after you have passed. A home is a way of leaving a legacy and creating generational wealth; it is a great foundation upon which your children and their children can build their fortunes and expand their horizons.

Achieve Your Other Goals

Over time, your home equity could increase, especially if your property is well-maintained and kept up-to-date. You can tap into that equity to assist with the financial needs of your growing family. Home equity financing can be used for funding tertiary education for your children, unique career opportunities for talented family members, surgical procedures for ailing grandparents and as touched on earlier, even for renovations. There are so many opportunities that home ownership exposes you to that renting cannot.

Home Ownership Apprehension

Many people intend to become homeowners eventually but they often put it off because they are overwhelmed with the amount of responsibility that comes with it. Renting is simpler and easier to do. As a result, when people move out of their childhood homes for the first time, they rent a small apartment, thinking that they would only be there temporarily. But six months turns into a year, which quickly dissolves into five years and before long, they have been renting for ten years! In reflecting, they may finally realise that home ownership is a journey; a process that you have to work your way through, not an event. You don’t have to go all-in at the get-go, it’s just important to begin the journey.

Alternative Options to Consider

To make things a little more manageable, hopeful homeowners can buy land first and then build later on. Or, if their family home sits on a large lot of land, they can choose to build an annex or granny suite as an extension of an existing home. Starter homes with a smaller square footage are also a great option for young childless couples or unmarried persons because their first home does not have to be their last home. As lifecycle stages change with the addition of children or a spouse, there is always the option to sell the starter home to upgrade for a more expansive property with more rooms, garage space and/or yard.

People also get stuck in the rental cycle if they are not certain if they want to put down roots as yet. Some may be entertaining thoughts of migrating and others may travel extensively for work or leisure, so they don’t feel the need to own property. While this is a perfectly reasonable decision, the idea of owning property which can generate supplemental rental income in the future should still be considered. In fact, that’s exactly how a lot of existing rental properties came about. Even if being a landlord doesn’t sound particularly appealing to you, there is still the option of living in your own home for a couple of years and then selling it at a profit in the future after it has appreciated in value. With home ownership, you have more choices available to you.

How TTMB can help

It may be overwhelming at first, but we are here to help. Beginning with the prequalification process, we can give you an idea of how much you can qualify for, so you’ll have a budget to work with when you start your property search. Additionally, we will also give you an estimate of how much your monthly mortgage payment could be so you can compare that figure to your likely rental payments and adjust your monthly budget to suit.

We have helped many persons realise their dreams of home ownership. Many of them, like you, may have considered renting but ultimately decided that becoming a homeowner instead was the best choice for them. We fully agree with that choice.

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