Renting vs. buying: Things to consider in today’s time.

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Renting versus buying will always be a buzzing debate and each side will convincingly argue their pros and cons. Since it will forever be a debate based on preferences and experiences you may want to read this to make up your own mind . . . for now.

When applying for a second home loan, some banks will not include a rental income into its affordability assessment. A scenario where this case is applicable is, for example, when a prospective buyer relocates a great distance from where he/she owns a property. If the individual cannot sell his/her property timeously and they rather opt to rent it out that individual may be denied the option of buying a second property and renting in the new location remains the only option.


For the individual, it may be a waste of money to rent instead of buy. It should be taken into account, however, that renting can be a better option when the individual is not overly familiar with his/her new location. Renting will provide a short term opportunity to familiarize the potential buyer with the new environment and housing market, providing him/her the opportunity to make a better informed decision of the neighbourhood and address in which to settle and buy property. It also allows time to find a suitable buyer for his/her original property at an acceptable price.


Renting is thus a very good option when looking for a short term accommodation solution while making long term decisions. Renting also offers time to get one’s finances in order to get yourself in a position to buy, since there are hidden costs not included in the mortgage amount.


As a tenant you may very well not be responsible for maintenance, insurance, and rates and taxes, but you will be assisting the landlord to increase his/her wealth by contributing to or even paying their entire mortgage instalment each month. In today’s time with very low interest rates, you might as well be paying the same instalment on your own mortgage if you decide to become a home owner now.


On the topic of monthly payment consider this: a leasing contract specifies an annual percentage monthly increase irrespective of the interest rate. This will not change so whether there is a change in the interest rate or not, tenants will still be paying more year on year. A home owner, on the other hand, will be paying less now on their mortgage instalment with the lower interest rate than a year ago. This is and has been the case for many months and still remains the case for the near future at least.


The upside of renting is the flexibility to move on relatively short notice. A lease agreement will stipulate a leasing time often as short as 6 months but usually 12 after which the contract is renewable. A buyer, on the other hand, is not as flexible and should their circumstances force them to move only months after taking up residence, they cannot as easily sell their property without incurring a serious monetary loss. Additionally, one can never be sure of exactly how long it takes for a property to sell at the price you want for it, if it even does.  Buying should be seen as a long term plan and investment. If your personal circumstances are not of a nature as to commit to such a plan, renting is the better option.


A disadvantage of renting is that the tenant is often at the mercy of the one you’re leasing from. It remains the owner’s property and he/she makes the rules which are to be adhered to by law. On the other hand, a homeowner renting out a property is at the mercy of the tenant to look after the property – not all tenants do this adequately. Even though tenants pay a deposit and damages to the property can be recovered from that, it is not guaranteed that the deposit will cover all the repair costs of a neglected and/or damaged property. Repairing damages can be a costly affair, and there may not even be a deposit left should it be that the tenant missed a payment and the deposit had to cover that. Tenants may also move out overnight leaving the homeowner high and dry without an income to cover the mortgage. This could be disastrous for the buyer of a second home who relied on the rental income of the first. As a buyer, you cannot simply leave the property and/or skip payments because the home remains the property of the bank until the buyer has paid the mortgage in full.


To conclude, the debate on renting or buying in today’s time remains a two-way argument with no wrong answer. The needs and unique circumstances of the individual or family will determine the best option at the specific time. One has to carefully identify your needs and thoughtfully consider your mid-term realities, the unknown, and the risks before deciding.


Buying a property is an emotional decision and a prospective buyer should keep emotions at bay and rather think rationally. Renting a property may seem an easy short-term decision, but it can still be very upsetting and disruptive for a family to have to pack up and leave when things don’t work out with property owners as planned.


Regardless of whether you want to rent or buy, it can only benefit you to discuss your options with local property agents who can provide information on the market in a particular area.