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Should you be Paying Rent or Buying a House?

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With growing job opportunities in the cities these days, the need to find a stable settling is an absolute necessity. So should you rent an apartment or buy yourself a house? The answer to this question isn’t common wisdom of experience, but the solution lies more on the economical side. While the idea of owning your own little backyard, or a side porch may sound exciting, how are you supposed make this big financial decision? Let us help you out a bit!

Owning a house is a big commitment. Even though once you’ve paid your mortgages, you’re free, but you need to be really sure whether you can afford such an investment. If the value of your house falls, you may lose more to the mortgage lender than what your home is actually worth. Most people compare the monthly payments to rent, which the obvious comparison to make. When you buy a house, there are so many payments to make- earnest money (the money you pay to the seller to prove that you are actually serious about buying the house, about 1-3%), down payment for your mortgages (some percentage of the house’s selling price you pay upfront, usually about 5-15%), then there are the property taxes you need to pay every six months, and miscellaneous inspection and appraisal costs. In all you’ll be paying about 2-4% more than the purchase price. While you feel you’re saving more by buying it all at once, you may have just seen the tip of the iceberg you are about to hit in future, especially if you don’t have enough funds.

Owning a house gives you flexibility, while it also requires you to be flexible. In a rented apartment, the landlord takes care of all the utilities and maintenance. But when YOU are the owner, you can’t excuse the crack in the ceiling, you’ve got to get yourself a plumber or fix it yourself. These reoccurring charges may cost you about 1-2% of the purchase price, every year.  You need to have reserves for unplanned repairs. On the other hand you have less flexibility when you are renting. If your landlord decides to sell the property or kick you out, you have to pack your bags and look for a new place. The landlord can even raise the rent, and you usually wouldn’t have a say in that. Buy when you buy a house of your own, you can paint your rooms black or build yourself a hot-tub, having no one to question you.

If you are a single guy, looking for a livable place to crash after 8 hours of work, you may consider renting an apartment, but if you have a family or you are planning to start a family, you may need some space. The real question is- can you afford to buy? Analyzing the current market conditions- you compare prices, or work out a savings plan and most importantly, stick to the plan. You need to be well prepared for the outgoing financial requirements for home ownership.

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