To rent or to buy: The verdict is in

Purchasing a house is a major milestone on everybody’s list. This major achievement is a dream many people have but may seem unattainable to most. This is why many people, regardless of age, choose to rent instead of buying a home. But is renting a house better than buying a home?

We’re here to settle the debate and help you decide whether you should rent or buy a house. Here are key factors you need to consider.

Should I rent or buy a house: Important considerations

Renting and buying a house are both valid housing options depending on your financial situation. The key to buying a home successfully is assessing whether you can afford to buy the property and/or manage a home loan.

Your finances

Consider your financial situation before you decide to rent or buy a house. Buying a house will cost a lot of money and is a major financial decision.

Knowing how banks assess loan applications, you need to make sure you are in good credit standing if you plan on taking out a loan. If you have good credit, you have a higher chance of getting approved for a home loan and may be in a position for loan negotiation to get better repayment terms.

Apart from that, you’ll need to pay the downpayment in cash (which is about 20%), as well as set aside a portion of your monthly income for the payments to come.

You need to be confident in your financial situation and capacity to pay to guarantee that you pay off your house as planned.

Cost of renting versus buying

Renting and buying (and owning) a house comes with unique expenses. When buying a house, you'll need to pay your loan for a certain number of years but you get a permanent house in return. You also need to pay your taxes, insurance, and maintenance. Meanwhile, as a renter, you don’t own the property so you need to pay rent to continue living there. Your landlord handles the taxes and maintenance costs.

Another factor to consider is the actual cost of your home. Houses and apartments come in different price points depending on the location. Some locations, particularly those near business districts, tend to be more expensive. For example, a two-bedroom home in the province may cost just as much as a studio apartment in a central business district in Metro Manila. But while living in the province may cost less, commuting to work will take more time and energy than living nearby in a more expensive apartment.

While having a house under your name is a dream come true, you may have to assess whether it’s better for you to rent or buy a house in the long run. Be logical and realistic with your decision-making process. Do your research and check the prices of houses and condominiums in different cities and even provinces, as well as how the choice fits your lifestyle, before deciding.

Your long-term plan

Where do you see yourself in a few years? If you are still unsure or you prefer the flexibility of being able to move around, then buying a home now may not be the right decision.

Buying a home is a major investment and will take five or more years to complete. Plus, given the investment it requires, you are expected to live there long term.

Also, consider your lifestyle. Will you enjoy having the responsibility of taking care of your home when there’s a leaky pipe or walls need repainting? Or would you rather just have your landlord take care of everything for you when something goes wrong in your home? Remember, becoming a homeowner entails added costs such as the upkeep and maintenance of your home.

Your risk tolerance

Finally, you need to understand that there are risks involved in owning a house. You need to weigh these before deciding whether you want to rent or buy a home.

As a renter, there’s a chance that your landlord could end your lease or evict you at any given time. This will be a stressful situation for anyone but will probably not cost you anything more than your security deposit.

On the other hand, if you are unable to pay for your monthly amortizations, you could default on the loan and lose your house to the bank. Others may try to amend this by taking out additional loans, but you can never be too sure about how safe online loans are. Your debt could pile up -- good debt could turn into bad debt. All the months spent paying for your loan would be gone and you would also lose your home.

There’s also the chance that the home you purchase doesn’t appreciate as expected or as quickly as you wished for.

Renting versus buying a house

To sum it up, here are the pros and cons of both buying and renting a home.

Advantages of buying a house

• The value of real estate appreciates over time
• You can customize your space according to your liking
• It’s a permanent living arrangement once it’s fully-paid

Disadvantages of buying a house

• If you fail to pay on time, you could default on your loan and lose your home
• Homes can also depreciate and lose value
• Maintenance and upkeep cost a lot
• Unless you are willing to shell out money again, you are fixed in that location for the foreseeable future

Advantages of renting

• Monthly housing costs are fixed
• Flexible living arrangements
• You do not need to pay for the upkeep of your home
• Money saved from upkeep can be put towards your savings for other things

Disadvantages of renting

• The money you pay for rent doesn’t go towards anything
• You have limited control over the appearance of your living space
• Rent could increase
• Your landlord could sell the place or end your lease at any time
• There is less stability

Would you rather rent or buy a house?

So, is buying a house better than renting? There is no right or wrong answer here. There are a lot of things to consider when renting or buying, and it ultimately depends on your situation.

If you’ve decided you’re ready to buy a house, Metrobank can help you buy your dream home sooner. Talk to us about a Metrobank Home Loan today.