Buying a property is one of the biggest financial decisions you’ll ever make. Is it the right decision for you right now – or would you better off renting?
Benefits of owning
- Once you have paid off your mortgage, your home will be yours and you won’t have to worry about paying for somewhere to live.
- You will not need to move every time landlord changes mind and decides to sell property.
- If your home increases in value you could use the equity to help buy a bigger home or fund a comfortable retirement.
- You can spend money improving your home and increasing its value without having to ask a landlord.
- Sometimes it can be cheaper to buy than rent.
Potential downsides of owning
- It’s a big commitment – you need to be sure you can afford what you’re taking on.
- If the value of your home falls, you may be unable to sell if you owe more to your mortgage lender than your home is worth.
- When interest rates rise, your repayments will go up. It’s important you’re prepared for a rise.
- You need to be sure you can afford maintenance costs like fixing a broken boiler or leaky roof.
- If you stretch your budget when you buy you may not have money for meals out, holidays and entertainment.
- You have less flexibility than when renting. For example, selling up and moving is more expensive as you have estate agency and legal fees to pay.
- It may not always be easy to sell your home, depending on what’s happening in the market.
- If you’re living with someone and split up, deciding what to do with the property can be complicated and expensive.
What about financials?
Let’s calculate for house: Rent or Buy Property in Cyprus
Assumptions:
- Loan amount: You can obtain a loan for an amount of up to 80% of the value of the property.
- Minimum repayment period: 15 years if you opt for a fixed interest rate.
- Asking price: 300,000. Down payment: 60,000.
- Rent price: 900 per month.
5 years | 10 years | 15 years | ||||
Buy | Rent | Buy | Rent | Buy | Rent | |
Payments | -121,516 | -54,000 | -243,031 | -108,000 | -364,547 | -162,000 |
Transfer Fees | -4,000 | 0 | -4,000 | 0 | -4,000 | 0 |
Interests | 0 | 5,400 | 0 | 10,800 | 0 | 16,200 |
Property Tax | -8,500 | 0 | -17,000 | 0 | -25,500 | 0 |
Assets | 300,000 | 60,000 | 300,000 | 60,000 | 300,000 | 60,000 |
165,984 | 11,400 | 35,969 | -37,200 | -94,047 | -85,800 |
Thus, in 15 years renting is more preferable than buying option, however after 20 years buying option will have increasing positive effect especially if the house price and rent price will rise.