What is more convenient to rent or buy a house as a regular residence?
Currently many of us have our home in a rental apartment, or we are simply living in our parents' house and looking for a flat to become independent.
If we take a look at the figures of the housing market during 2018 we will see that they are very positive in purchases and number of mortgages. We will also notice that sales prices have risen and rental prices have skyrocketed.
At this time we all wonder if it is more convenient to rent a home or choose to buy it, if renting is throwing money or if buying entails some costs and risks that do not compensate. There is truly no better option than another, since many factors come into play, such as our profile, our needs and the future economic impact of each one, taking into account also the emotional part.
What we have to understand is that it is a very important financial decision, and that renting or buying will affect our personal and professional goals. Knowing what is best for us is a matter of taking it easy, doing a thorough analysis thinking that is what we need, doing accounts and dedicating time.
In this article we will try to help you make the best decision for you and we offer you the variables that you must take into account when evaluating if it is preferable to buy or rent a home.
Buy before renting?
Surely the purchase of a home is the most important economic decision that we will take in our life, and respond correctly to the question is essential.
Traditionally Girona, Catalonia or Spain, has always been a country of owners, betting on the purchase against the lease. If we did not take into account our economic situation and give us the option to choose, most, if not all, we would prefer to buy a home to make it our home. In other words, most of us think that renting is throwing money away.
Initially in the purchase of an apartment we must assess the expenses associated with the sale and the formalization of the mortgage loan, which are normally borne by the buyer:
INITIAL DISBURSEMENT FOR THE PURCHASE OF A FLOOR
Own resources. Generally the bank will finance up to 80% of the purchase price of the home, therefore, we must provide the remaining 20%.
Tax of documented legal acts (AJD). In Catalonia, whenever it is a first transmission for VAT purposes, when you buy a new home you must pay 1.5% of the price of the deed of sale.
Notary and registry. The expenses of the purchase and sale in terms of Notary and Registry are borne by the buyer and round about 2% of the sale price.
VAT or ITP. The purchase and sale of a new home is subject to VAT payment, which for this type of transaction is 10% of the total purchase price. If a second-hand home is purchased, 10% must be paid as a property transfer tax (ITP).
In summary mode, the initial sale and purchase of a new construction floor is around 33.5% of the purchase price and for a second-hand floor, that is, of second transmission, it is 32% of the writing price. notary.
We must take into account, what in cases with favorable profile and financial history, we can currently find funding up to 100% of the sale price in the purchase of a home, thus reducing the initial outlay up to 12%.
INITIAL DISBURSEMENT FOR THE RENTAL OF A FLOOR
Bail. Generally, on average, usually request 2 months rent as a deposit.
First monthly payment. It is usually paid the first month of rent at the time of signing the lease.
Real Estate. If we manage the rental contract through a real estate agent, the most usual thing is that they charge a rent monthly fee plus the corresponding VAT.
MONTHLY DISBURSEMENT OF PURCHASE AND RENT OF A FLOOR
As a general rule, a variable rate mortgage loan with a EURIBOR + 1.25% differential (currently it would be 1.25% since the annual Euribor is negative) to repay in 30 years, approximately the resulting monthly installments would be the following:
• For a € 100,000 mortgage it would be € 333
• For a mortgage of € 150,000 it would be € 500
• For a mortgage of € 200,000 it would be € 666
• For a mortgage of € 250,000 it would be € 833
In the case of rent, the monthly payment is the rent that we agreed upon at the time of signing the lease agreement. As a general rule, the owner of the house seeks an approximate return of 5% of the purchase price of the property. Therefore, if we make a comparison with the acquisition prices of a floor financed at 80%, approximately the resulting monthly rent would be the following:
• For a flat of € 125,000 (€ 100,000 mortgage) it would be € 500
• For a flat of € 187,500 (mortgage of € 150,000) it would be € 750
• For a flat of € 250,000 (€ 200,000 mortgage) it would be € 1000
• For a floor of € 312,500 (€ 250,000 mortgage) it would be € 1,300
So, while the initial cost is much cheaper if it is rented, when facing the monthly payments and taking into account the average costs, the mortgage payments are smaller.
ADDITIONAL COSTS IN THE PURCHASE AND RENT OF A HOUSING
When we buy or rent a home it is advisable to take out home insurance, each case with its most recommended coverage.
In the case of owning our home we will have to face the payment of the real estate tax (IBI), as well as the obligatory expenses derived from the community of owners. These expenses will not exist in the rental, unless there is some agreement to the contrary in the lease.
The emotional part of buying or renting a home
The decision to acquire our home ownership ties us emotionally more to a specific place, but in many cases, it leads us to be less flexible regarding labor mobility. We are also closely linked since it affects the flexibility of movements in front of the need to change the type of housing, due to the size of the home or the lack of services in the area.
Buying a flat or a thing for a habitual residence gives us more stability, since the rental contracts have to be renewed and over the years we will be forced to renew the contract several times, and if the owner chooses not to renew the contract, We will have to spend time and money finding another home to move.
Is buying an apartment, long term, an investment?
No, it's not an investment, it's a way to save. If we buy a house as a habitual residence, from our point of view, it is a very good way to save, only that, tomorrow, instead of having money, we will have a home where to live. Thanks to this, when we have the mortgage paid and, above all, when we retire, we will not have to pay rent for the rest of our lives.
In fact, for many people, their property is the pension plan for their old age. Your savings are deposited during a large part of your life in a property that will be your greatest asset.
There really is not a single answer to whether it is better to buy or rent, because, as we have seen, it depends on many factors: from our financial capacity to our risk aversion or the type of housing we need. Therefore, and beyond emotional factors, trends or generalized recommendations, always have to make an in-depth analysis so that the decision we make is the one that best suits our needs.