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should I buy a house or rent

Updated on January 5, 2013

Renting or buying a house

As a young adult i find myself debating on when is the right time to buy a house and get out of the rental trap. There are many attractive packages coming up nowadays that enable one to borrow money with very little savings but one has to wonder whether this is always a good idea. Below are a couple of things I found out and are definitely worth considering when thinking of getting that mortgage.

Renting

for those of us who are terrified of commitment this always seems like a great option. However when renting it is in all honesty just money going down the drain and at the end of the day you are paying someone else's mortgage. That being said if you live in shared accommodation it could be a great way to save deposit for the down payment of your new home as shared accommodation is usually very cheap but if you love your privacy like most people this could totally not be for you. Doing it this way can reduce the life of your loan when you do borrow money and greatly reduce the principal that you will borrow. A low principal means that the total amount of money paid as interest will also be reduced.

Buying

buying a house is a great achievement. When you do decide to buy it is better if you have a substantial amount saved for the deposit of your house as mentioned above this reduces the principal that you borrow and hence the interest. With most banks if you have less than twenty percent of the deposit they charge you an extra fee as insurance for them just in case you don't pay them back. This amount including the interest on the loan that you borrow can see you paying a lot of money over and above that which you borrowed. Be sure you understand how much exactly you will owe the bank when you decide to borrow do you research on what the interest rate of the loan is and whether to get a fixed mortgage or a flactuating mortgage depending on the economic situation.

New house or old house

As surprising as it may seem most times it is actually more expensive to buy a house that is already built and is in an established area, that means that there are already schools around and maybe it's close to public transport and shops. If its not so important for you to live near the city centre and to get in your new house straight away building will be the way to go and besides you get a bit of time to sort yourself out financially and tie some loose ends before the big move.

When buying a house therefore save as much money for the deposit as you can and you might just save yourself on a whole lot of interest.

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    • cptjarum profile image
      Author

      jane 4 years ago from perth

      I was doing a bit of research because I was considering buying a house. I will definitely have a look into that as well thanks.

    • Efficient Admin profile image

      Efficient Admin 4 years ago from Charlotte, NC

      Sounds like you have a good understanding about buying a place of your own. Also consider if you want to buy a Fixer Upper house or a house that has been taken care of and maintained really well. Fixer uppers may have a much lower selling price but you have to put money into it to fix it up. Interesting hub, voted up.