Renting vs Buying a Home: Which is Right for You?
According to Card Up, Singapore ranked 5th among the highest homeownership rate which stands at 90.7 percent as of 2017. However, with the large number of foreign workers and Permanent Residents living in the city–approximately 64 percent of the population as of 2017–along with strict controls on who can purchase HDB properties, the question of whether to rent or buy is increasingly salient.
Renting vs Buying a Home: Benefits and Drawbacks
- Not responsible for repairs and maintenance
- Freedom to be mobile
- Fewer paperwork and upfront costs
- No need to worry about fluctuation of home values
- No property tax bills
- Allows you to test-drive various living spaces
- Rental rate can increase over time
- Landlord might decide to stop renting or sell the property
- Limited sense of permanence or home stability
- Don’t build equity
- No tax benefits
- Options may be limited depending on vacancies
- No landlord to answer to
- You may reap tax benefits
- Unlimited freedom to customize living space
- May build credit and equity
- Sense of permanence/ home stability
- Home value may go down
- Extra costs beyond mortgage payments
- Requires upfront paperwork and substantial money
- Responsible for maintenance, renovations, repairs which requires time and effort
- Recent tax laws could hamper tax benefits
- Less flexibility to be mobile
- Low inventory in many markets and rising home prices
- Could lose money if home values decline
Rent or Buy: 4 Questions to Consider When Making a Decision
The answer to the rent or buy a house discussion is not so cut and dried. Here are four questions to ask when thinking about renting vs. buying:
How Long Do You Plan to Stay in the House?
Convenience is important when it comes to deciding whether you’re going to rent or buy a house–especially if you’re single and busy all the time with work. Are you longing for flexibility? Or are you planning on putting down roots in your community?
If you feel certain you will stay in a house for at least five years, purchasing a home could make sense. Choosing one which offers you convenience like Florence Residences Condo with easy access to schools, hospitals, amenities, and more is a good way to start. That’s because it could be a good fit both emotionally and financially. The next thing you’ll want is driving your kids far to their schools everyday by the time you start to raise your own family. If you have decided to stay long, you can also put personal touches on your house and really make it feel like it is yours.
If you prefer to be more nomadic and have no plans of staying long, however, renting is the better option. For instance, let’s say you are hoping and pursuing to get that job promotion, but it is halfway across the country. You don’t have to worry about the struggle of selling a house while transitioning to a new position. Or perhaps you have moved to a new region and want some time to get to know various neighborhoods prior to settling down somewhere.
Of course, you can purchase a home and then sell it within a few years. However, the expenses aren’t worth it. Besides moving and initial closing costs, you may be paying more closing costs when selling a property in addition to other expenses such as renovations and repairs that would make the house sell for top dollar.
Are You After Stability or Flexibility?
As cliche as it may sound, but life happens. Even with the best of intentions, it is difficult to predict what will happen next. In connection to the explanation previously, if you have the financial means and intend to stay in one place for a long time, purchasing a home may make more sense. However, it is vital to take a look at your current life situation and consider whether or not it will change within the next few years. Because if it does, your housing needs could change as well (i.e., you may want to resist purchasing a home).
For instance, you and your long-term partner may have just gotten engaged and plan on getting married after a year. In this case, purchasing a home may not make sense. Perhaps you two want to work out your budgeting routine and figure out how to combine your finances before adding a home into the mix. Or let’s say you and your spouse just got married but you’re not certain if you want to start a family quite yet. If you have any ideas that you might want to have kids soon, you should not purchase a home that is not going to accommodate your growing family in a few years.
In both of these situations, it might be best to rent for the time being so you have time to work out what your budgeting needs are, what you want in a home, and what kind of home might be the right fit for the lifestyle you hope to have in the future. Also, if there is uncertainty in your career, if you think there will be a change in your career in the future and you have to leave the country, renting offers you the freedom to leave without having to deal with selling or who will take care of the house. If you have uncertainty in your income, renting could be the best option as well. A cut in pay in the near future can impact your ability to pay a mortgage. On the flip side, owning a house can provide you with an asset to generate income someday. And if you happen to leave the country, you could rent it out and earn from it.
What Can You Afford?
In many cases, renting can be less expensive than buying a house due to the upfront costs involved. This includes closing costs, down payment, agent commissions (if you hire a property agent), any renovations and other maintenance fees. That said, just because you can afford to pay your monthly mortgage payment does not mean you can afford a house; costs add up. In addition to a monthly payment that is more than the interest and principal on your mortgage, you will also have homeowners’ insurance, property taxes, homeowners association fees, and (in many cases) mortgage insurance.
Buying a home, on the other hand, can offer you to build equity and can be less expensive in the long run. (Hopefully, your home value will increase once you decide to sell your property.) Not only that, but there are tax benefits to being a homeowner. That is not to say you should throw yourself into homeownership. It is perfectly fine if you rent for a few years first, save up some money, and buy a home if you are already dead set on having a place to call your own. The savings in expenses of being a homeowner also assume you will not factor in maintenance costs and stay in a house for the long term. Then again, if you do pay off your mortgage and continue to reside in the property, the savings can be significantly less expensive even with home maintenance expenses.
How is Your Financial Situation Right Now?
When deciding between renting and buying, it is crucial to note that you have to be realistic about your financial situation. Once you calculate the costs of renting vs buying, be honest as to whether you can afford other upfront costs like repairs, down payment, buying new furniture, and moving costs. In either case, do some careful budgeting, do your research, seek advice from professionals today so no matter what decisions you have in mind you will be able to afford a home or rent.
At the end of the day, only you can decide if purchasing a property or renting for the meantime is best for you. Purchasing a house is possibly the biggest financial commitment you will ever make, so just because everyone else is buying a property, does not mean you should as well. You don’t have to purchase a home to live a successful and happy life. If you can make it work, however, a house that you can call home can become a great asset to you. When it comes to buying vs renting a home, there is no right or wrong answer. It’s all about what works best for your budget and your situation along with the lifestyle you decided to live.