My husband and I always thought that "investing" in a house was the smart thing to do. Until a few months ago when I talked to M, who had been thinking about the merits of renting vs. buying. M's a smart guy. He's done the math. Paying for rent doesn't quite add up to the hefty amount it takes to pay for a mortgage. "Unless I could pay off, like, 50 percent up front, I don't think it makes sense for me to buy," he said. And apparently, this guy agrees with him.
It seems to make sense. I know homeowners (or, more accurately, would-be owners) who pay about six times what we're paying on rent every month, and just the thought of all that money makes me dizzy. (And I've also seen the amount of stress it puts on them, on top of earning money to send kids to school, put food on the table, etc. etc.) I know a couple who pays about four hundred grand a month for their brand-spankin' new home. I can't even imagine all the hustlin' I would have to do to come up with that much moolah month after month.
What I can imagine is what I could do with the money that goes into hypothetical amortization payments: I could invest. I could travel with my husband (at P400,000 a month, we could go to Europe all the frickin' time!). I could buy stuff I would normally have second thoughts about buying because I've got over a hundred Gs to pay each month. I could be liquid. And then I won't have to worry about fire or earthquakes or whataver 2012-esque disasters damaging my house because, well, it's not really my house.
Some will argue that having a home gives you very important stuff like peace of mind and a sense of ownership. I get it, I totally get it. I do want to buy a house,* but only when I'm good and ready, financially. For now, I'd rather have the peace of mind that comes with being liquid. I'd rather have the freedom to travel because my money's not tied down to a house. I won't get land with the relatively small amount I'm funneling towards rent each month, but I still get a very decent roof over my head. So, until the day when we can comfortably afford to buy a house--meaning we can pay off a significant amount upfront and not have to stress over the monthly payments and still have a good life all around--we'll willingly, happily rent.
I may be totally misguided, of course. Do you think buying is so much better than renting? Share your thoughts!:)
*As opposed to a condo.
I may be totally misguided, of course. Do you think buying is so much better than renting? Share your thoughts!:)
*As opposed to a condo.
I do think buying is better than renting.. but not necessarily buying your dream house. At least not right away. Right now I'm living in a condo which my parents bought for me, and I've been staying here for so many years now I think it's already worth it just for the convenience it has given me, being near my workplace and the commercial areas and all. When I get married and move out in the future I can imagine this will still be a valuable space because of its location, and we can probably rent it out. If we just rented all those years, the money would have gone to waste. But I agree with you about choosing to rent over choosing to pay mortgage - in my case since this isn't a house but a small condominium unit, we were fortunate enough to have been able to afford it with cash. Since I was a little girl my parents have brainwashed me into thinking mortgage=evil. :-P
ReplyDeleteBy the way, of course when I've saved up enough, I can always buy a house, too. :-)
ReplyDeleteI'm all for buying, of course, but only if I can truly afford it. By truly affording it, I mean not sacrificing quality of life and not stopping payments midway (and losing so much money + a house). While condo living is great and convenient and generally more affordable than a house in a good location, it's just not for us--we both grew up in houses, so space is important to us. Luckily, we're able to rent a duplex at such a reasonable price in an area that's perfect for us.:)
ReplyDeleteSo here's hoping we can one day plunk down a big wad of cash for that dream house! Haha
Great post Tisha! :-) LOVE it! Kind of affirms our decision to rent for now :-) And yes, what better way to use money that would go to monthly house payments than to invest! :-) I would invest in mutual funds and stocks, just as we were taught at the IMG-Wealth Academy! :-) hehe.
ReplyDeleteBy the way, hope you got my e-mail with my CV! :-) Thanks again! Godbless!
Hi! Yup, got your email.:)
ReplyDeleteThe US tax code allows us to reduce our taxable income by the amount of interest we pay on a mortgage. That encourages people to buy instead of rent. When I first got married, all of my older friends told me I should get as big a mortgage as I could possibly afford at the moment because as my career advanced, my pay would go up and it would be easier to afford the mortgage. It was tough when we first had kids, but within five years it turned out to be true. I guess it comes down to personal preference and what you're comfortable doing.
ReplyDeleteI just read "tax" and it made my heart bleed. Haha. You're lucky. Not sure about our own tax code, but taxes in general here are, to use a very eloquent word, crappy. I wouldn't mind so much if I could see it being put to good use.:s
ReplyDeleteBuying is always the better way to go as long as interest rates are reasonable. My interest rate for my place in Toronto is currently at 1.9% annually, (I have a fantastic credit rating) and I know it'd be impossible to get anywhere near that in the US, or in the Philippines.
ReplyDeleteI bought my condo young (24) and its honestly the best investment I've made.
btw
while I was in Manila last year shopping in a mall, I had one of those impulse buys that led me to purchase a condo in Quezon city. I still don't know if it was a smart move, and I'm still debating weather on not to continue to pay for it, or just take a 5000 dollar deposit loss.
Wil
I remember reading some financial advice columns - they say that monthly rent or mortgage payments should not exceed 40% of your monthly cash flow. In that regard your decision between renting and buying is sort of symmetrical. It's not really about buying or renting, it's about the 400k price tag. You wouldn't get a 400k rental, either, right? The question is, if you can buy a property that has the same monthly amortization as your rent, would you get it?
ReplyDeleteAnother thing is that a house is not really an 'investment' if you intend to live in it for the long term. It should be viewed as an expense like clothes or cars. You can't really expect it to grow in value or earn you income.
I am most definitely not going to find a house similar to ours (three bedrooms, great area) with amortization that equals our rent. We'd probably have to pay at least triple every month (plus down payment).
DeleteI am most definitely not going to find a house similar to ours (three bedrooms, great area) with amortization that equals our rent. We'd probably have to pay at least triple every month (plus down payment).
DeleteI'd say rent. But it does come down to priorities and where you are in your life. I like what you said about being liquid enough to travel and live comfortably; experiential vs material—the former for now, and hopefully be able to afford both down the line.
ReplyDeleteIn NY/US, true, there are tax breaks and all of that. But, when you own your home, you also bear the responsibility of maintenance (e.g. plumbing, heat, window repairs) which can be very pricey. I say for young couples, live and rent in an apartment building with a reliable superintendent and then travel the world ;)
Like.:) Although I'm not sure if we're still considered a "young couple." Haha
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