Buy or rent? The truth is that there is no better option than another but depends on the profile and the needs of each. On this page we help you make the best decision for you and show you some of the best mortgages in the market, if you finally decide to buy a house .
Buy or rent: what option suits me according to my profile?
If we are in full search of a new home, we usually ask ourselves a logical question: is it smarter to opt for rent or purchase?
On the one hand, renting may seem like “throwing money”, because we are never going to get the property, but signing a mortgage also means wasting a large part of the money on interest, taxes or commissions. In addition, it implies a large initial outlay and a commitment that will mark our economy for decades.
The choice, at first glance, is not easy. In fact, the first thing to know is that there is no better option in general but it will depend on each case. That is why, before making such an important decision, it is necessary to have raised several issues that we will discuss in the following points.
Keys before choosing to buy instead of rent
Spain is a country where, traditionally, it has opted for the acquisition of homes against leasing. However, when choosing between renting or buying, we must take into account different aspects that begin with our own profile but also go through having clear the vital priorities that we have and the expenses that must be assumed when buying a home.
To buy you need savings of 32% of the value of the house
Many do not know that in order to apply for a mortgage, approximately 32% of the value of the home must be saved. Of that part, 12% must be used to pay the mortgage and purchase and sale expenses and 20% to pay the part that the banks currently do not finance (since they generally only grant 80% of the appraisal or sale value).
Another option is to sign a 100% mortgage, but keep in mind that these products are only granted to people with high purchasing power or who buy bank floors. In addition, even if we sign a 100 mortgage, we must continue to have savings to cover the approximate 12% of expenses.
So before making the decision to rent or buy, we must analyze if we have enough savings to buy a home and mortgage us.
A good profile, the key to getting the best financing
Apart from the savings, banks value other factors before deciding to grant us a mortgage or not, such as age, monthly income, job security or our savings. And it is that our profile and the policy of the entity will decide the concession, but also the conditions that the mortgage will have.
As we have seen, it is much more difficult to obtain 100% financing than one to 80% and the disbursement that we have to face with one or the other also varies. In addition, it is not the same to get a mortgage to buy a flat with a low interest than another more expensive and full of commissions, something that can also depend on our profile.
Our income will also influence the house and the mortgage we can afford. That is why it is useful to use calculators that allow us to know the value of the house to which we can aspire. Likewise, we must keep in mind that we should never dedicate more than 35% of our income to paying off financial debts, including the mortgage loan fee.
Long-term commitment: Do I want to buy or rent is better for me?
Another aspect that we must take into account when deciding whether to buy or rent is that, if we have to ask for a mortgage, we will have a long-term commitment to the bank and, probably, limit geographical mobility.
That may not be a problem for many, but if we plan to change cities in the short or medium term or our work makes us live in different locations, we must seriously consider whether it is better to opt for rent or purchase.
In any case, if we are clear that we prefer to buy, but in a few years our situation changes and we have to move, we can always choose to sell the house or rent it and, with whatever we take out, to pay the mortgage payment.
We must be attentive to the evolution of the price of housing
At the time of deciding between buying or renting it is essential that we inform ourselves well of the price of the house and also of its evolution. In this way we can see if it is a good time to make an investment in housing or if, on the contrary, the price of real estate is very high and it is a bad time to buy.
In what cases should rent more than buy?
There are situations in which our position or the preferences that we have make the balance of rent or purchase decant towards the acquisition of housing. However, we can also find times when it is better to opt for the lease. Next, we will see what to keep in mind if we choose this route.
Entrance fees are much lower
Saving is a key aspect in the decision between purchase or rent, since, as we have seen, to buy a home you have to have a lot of money saved. However, this initial amount drops significantly to enter to live in a house for rent.
And, in general, to rent a house, we will be asked for the payment of the current month, another (or other two) of bail and the part that the intermediary takes (a real estate, usually) if we have used external services to contact with the owner.
Money is not invested in getting a good, but in its use
Another of the main differences between renting or buying is that when paying a mortgage we are allocating the money to the acquisition of a good. On the other hand, when paying a lease, we only use it.
For many this means ‘throwing money’. However, rent may be the solution for those who do not have enough savings to face the entry of a mortgage. Also, for people who need or want to have greater geographical mobility, for those who do not want to buy a house or, simply, for those who do not have financial stability that allows them to be linked to a mortgage.
In fact, another great point that differentiates the rental from the purchase is that if our income goes down and we cannot cope with the mortgage we can lose our home and put our personal assets at risk. However, if we cannot pay the rent of the house and we do not comply with the contract, the only thing we will lose is the deposit.
The evolution of the rental price, key to the decision
In recent years the demand for rent was growing. However, one of the effects of this trend (among other reasons) is that the lease price has increased, especially in large cities, where the tourist rental boom has also impacted .
Knowing the evolution of the rental price in our location can also be important to decide if it is better to buy or rent. This information can be consulted on pages specialized in the sale and lease of real estate, since they usually collect data from their own transactions to conduct studies in this regard.