Why you should buy rather than rent your home
Category Advice
Why you should buy rather than rent your home
The choice between renting and buying a home is important for many South Africans. While renting provides flexibility and fewer upfront responsibilities, owning your own home offers greater long-term financial benefits and security.
Purchasing a home involves making payments toward an asset that you own, rather than paying rent to a landlord. It allows you to build equity with each mortgage payment while paying monthly rent offers no return on investment as it is purely an expense.
As your loan balance decreases and the property value increases, you accumulate wealth. Homeownership turns a monthly expense into long-term savings and investment. It helps create an asset of considerable value which can be leveraged for future financial goals.
Importantly, owning your own home offers stability and value growth. It also offers the flexibility of being able to make future changes to your living space which cannot easily be done in a rental. You can therefore upgrade the home and add comfort to your lifestyle while increasing the value of the asset.
Owning a home also creates important stability, as it removes the uncertainty associated with renting. You do not have to deal with lease renewals, rent increases, or the landlord selling the property.
Property as an asset class has historically been a good investment and an effective inflation hedge, but always depends on where you buy, and how much you pay for the property. As living costs rise, property values typically increase thus preserving your capital investment.
Where rents tend to go up annually, long-term homeownership can lower your monthly costs as the home loan repayments will largely stay the same, subject obviously to interest rate fluctuation. You can also invest all spare cash, bonuses and the like into your home loan to further reduce it, or to accumulate savings for future use. It creates financial security and can serve as collateral when needed.
Purchasing a home requires careful planning and financial commitment. The shift from being a tenant to a homeowner involves moving from paying for temporary accommodation to making an investment in a fixed asset, building long-term equity, and establishing a stable residence. Owning your own home creates security and builds wealth.
A major benefit in South Africa is that you can finance your property purchase with a home loan over a period of twenty to thirty years depending on your age and credit profile. A recent survey by ooba showed that first-time home buyers remain a considerable part of the property market and some 46.5% of their home loans over the last few months were from first-time buyers.
It remains a favourable time for those who are financially secure to invest in their own homes. The banks remain supportive, and many are still granting full 100% mortgage loans, sometimes still with costs on top of that. The longer you wait, the more you will likely pay as property prices continue appreciating.
The idea of homeownership is the holy grail of adulthood and evidence of success has been ingrained in us for generations and property still remains one of the best long-term investments, so many people are in a quandary about whether to delay the purchase or bite the bullet and get a foot on the property ladder no matter the consequences
But it's not a simple choice as each option offers distinct benefits and drawbacks and with the economic fluctuations, high interest rates and uncertainties that we're seeing, it's essential to carefully assess one's current financial situation and long-term goals before committing to either option.
Advantages of Ownership:
Building Equity:
One of the most significant advantages of homeownership is building equity. As you make mortgage payments, you are gradually increasing your ownership stake in the property. Over time, this equity can serve as a valuable asset and a potential source of wealth.
Stability and Freedom:
Owning a home provides stability and the freedom to personalize and modify the property to suit your preferences. You have more control over your living space and can make long-term plans without concerns about lease expirations or rent hikes.
Tax Benefits: Homeownership can come with tax advantages, such as deducting mortgage interest and property taxes from your taxable income. These benefits can help reduce your overall tax liability.
Extract from Property 24
Author: Extract from Property 24
