The number of US households living on rent increases and the number of homeowners decreases, although the percentage of mortgages continues in our country above 75%. What should you do, buy or rent? Blogs on saving money and tips give these 5 questions and are awaiting your answer to choose and make the right decision. More rental homes and fewer homeowners… That is the trend indicated by the latest “Survey of Living Conditions” published by the INE in June 2018. Specifically, the percentage of homes with homeownership fell in 2017 to 76.7% compared to 77.1% from the previous year. The number of households living on a rental basis reached the maximum since there are statistics, with 16.9%, compared to 16.3% the previous year. But renting was not wasting money? Let’s disassemble the myths. Before the classic “buy or rent”, there are no absolute truths. We propose a series of questions that will solve the doubt about buying or renting.
1. What savings do I have?
It is necessary, first, to determine our savings and not just how much we can spend per month on housing. Both the purchase and the rent are accompanied by expenses at the beginning. The expenses associated with the purchase are around 10-15% of the total value of the home. As for the rent, they will be lower at the beginning but they can ask for a guarantee of between 3 and 6 monthly payments, it will depend on the negotiation between you and the owner and/or real estate agency.
2. What is my monthly salary?
The Bank of America recommends that the monthly mortgage amount does not exceed thirty percent of your overall income. Likewise, the rental price should not be more than 30% of your salary.
Expenses when you own:
In addition to the mortgage expense, you will have to consider other expenses when you own:
- Real Estate Tax (IBI).
- The community receipt.
- The community insurance that covers structural claims of the property.
Expenses when you are a tenant. It will depend on the signed contract, so it is very important that you negotiate well with the owner:
- Supplies expense: water, electricity, gas, telephone, internet connection …
- Property Transfer Tax (ITP), depending on the Autonomous Community.
- Garbage rate (depending on the municipalities).
- Expenses derived from the usual maintenance of the house, small repairs (expenses less than 150 euros for the daily use of the floor: changing a light bulb, fixing the bathroom chain, the blind strap, etc.).
- In the case of having insurance, content insurance, and third-party liability.
- Damage to rented housing (such as broken glass).
3. Do I plan to stay a long time living in that place?
It is important to know if our intention is to stay in the home for a few years and if we will amortize the initial expenses both when buying and when renting. Logically, the rent gives more flexibility, but we must also take into account the fine print of when and how we can terminate the contract so as not to pay unexpected expenses.
4. Where is the house located?
We have to consider whether it is near or far from work or our friends and family, which will mean more or less spending on work or leisure trips. It is also important to study the neighborhood of housing: services, transport, infrastructure, etc., and if the area will be revalued or, quite the contrary. That can give us clues in the case of purchase: if tomorrow would be easily salable; or in the case of rent: if the tenants will consider raising the prices of the area.
5. Is it important for me to “create my own home”?
What for some is not important, such as deciding spaces or decoration, for others, it is vital to feeling their home as their own. It is necessary to know in that case what changes the owner will allow when we go to rent and which not, as well as the possibility or not that dogs or other pets can live with us. If you have made numbers and answered these 5 questions, the balance will have opted for one or the other side and you will make the right decision whether to rent or buy housing. Do not get carried away by trends or opinions that are not from experts. Your best formula is the one that adapts to your needs, realities, and expectations. And now, if you already have the answer, the best thing comes next: find your next home.