Is it better to buy or rent a house?
Low interest rates, coupled with record high bank loans, now make the perfect time to buy a home.
That’s according to Rhys Dyer, CEO of ooba Group (ooba Home Loans) who says that despite the foreclosure and a turbulent economy, more people are investing in homes than ever before – and also spending larger amounts. “Our latest statistics for the second quarter of 2021 show a 16.6% growth in the average purchase price of a home – Rand 1,407,071 and Rand 1,104,351 – up 10.9% for first-time buyers “.
This indicates that people are âbuyingâ because of the low interest rates and the need for more space while working from home, he explains.
Buying puts pressure on the rental market
As home buying continues on its upward trajectory, many people (at age 35 on average) choose to terminate their lease and invest in a home, putting pressure on landlords. Dyer believes those who haven’t yet taken the plunge are held back by affordability, bad credit scores, lifestyle and flexibility.
Weighing the pros and cons of buying a home
Dyer explains that three successive rate cuts reduced the prime interest rate to 7.25%, the lowest level since 1973. This means that a monthly bond repayment in the amount of R 1 million has passed. from Rand 9,650 to Rand 7,904.
It highlights the advantages of buying a home as follows:
- Reduced monthly payments: If the interest rate drops, so does your monthly mortgage repayment. “On the other hand, a rental agreement is usually fixed, so you may be paying inflated rental prices at this point.”
- First-time buyers have the upper hand: “First-time buyers are aware of low interest rates and no deposit home loans (in many cases).” Currently, 60% of first-time buyers in the ooba group acquire a property without having access to a deposit.
- Negociation power: âThe oversupply of homes on the market now makes a good time to start negotiating a good deal on your dream home. “
- The power to own an asset: âYour property is likely to be an appreciating asset, especially over the long term, and it could even be used as investment property in the future. If the value of the property increases, the value of your personal wealth should also increase and you are more likely to make a profit if you sell it.
- Take charge: âIn general, you can do whatever you want with the decor and the outdoor spaces (subject to board or company approval), and any improvement is likely to improve your lifestyle and increase the value of your home. “
Some of the downsides include:
- Additional costs : When renting, maintenance and repairs are generally the responsibility of the owner. However, when you buy a home, the responsibility lies with you. It’s important that you set aside funds and maintain your home so that it maintains (and increases) its value. âAlso keep in mind costs such as levies (and special levies), rates, taxes and insurance. “
- Refunds can fluctuate: âYour monthly mortgage repayment is subject to interest rate hikes. When budgeting for a home, do the math on various interest rates and make sure you’re buying within your means.
Escape the rent trap
To settle the debate, Dyer strongly recommends paying off your own home loan over someone else’s. âIt is recommended not to fall into the comfort zone of renting and first-time buyers to take advantage of current market conditions. For those who are unsure whether they qualify for a home loan, work with industry experts to check your credit score, receive pre-approval, and ultimately apply for a home loan. Finally, if you intend to buy to rent, (remember) the income from the rent can be used to pay off your mortgageâ¦ â
For more information visit www.ooba.co.za