Deciding whether you should buy a house or rent? If you're planning to buy a house you have to be financially ready, your credit score needs to be healthy, have at least 10% of the property price for the downpayment, prepare extra cash for miscellaneous charges and the list goes on. Hence, a lot of people opt to rent. But then again, owning a house has somehow become one of the life goals for most of us. Let us help you decide if you should rent or buy a house.
Are you financially ready to buy a house?
If you have no idea how much a house cost, let us break it to you in the simplest way.
- You need a good credit score, so the bank will approve your loan. Learn more about credit scores, here.
- The bank will also examine your DSR before approving your loan. DSR or Debt Service Ratio refers to the percentage of your monthly income that is used to pay your monthly debt. Banks use this ratio to determine your ability to repay the loan you’re applying for. Each bank has its own maximum allowable DSR limit. Normally, it would be around 70%. Find out your DSR with this formula:
DSR Formula: Debt ÷ Monthly Income X 100.
- Once your loan is approved, you need to prepare at least 10-20% for the downpayment of the property you’re eyeing.
- You need to be able to afford the monthly instalment and other miscellaneous charges such as stamp duty, legal fees, maintenance fees, sinking fund, quit rent or ‘cukai tanah’ for landed properties and property assessment tax or ‘cukai pintu’.
Rent if you want to enjoy a fixed monthly commitment
Some of us are living on a tight budget and are not able to afford any unexpected expenses. If this describes your financial situation, we would recommend you to rent instead of buying a property.
You’d only have to pay the amount you agreed with your landlord for the span of your contract. You will also be exempted from paying maintenance and other charges. This cost will fall upon the homeowner.
While of course, the homeowner can raise the rent, they still have to provide an advance notice which allows you to budget and consider other options.
Find out how you to ask your landlord to lower your rent, here.
Real estate is one of the best investments
No matter how you define the word investment here, buying a house has a lot of advantages, provided you’ve prepared yourself and understand the risks.
You can buy a house to live in, that’s an investment. In years to come, the property prices will increase and buying one now especially if you’re financially ready will save you all the headaches in the future.
You can also generate income from your property by renting it out or simply wait until it multiplies in value, then sell it off – that’s also an investment.
Related: 7 Lesser-Known Websites To List Your Property On
You’ve more flexibility if you’re renting
Renting would be the best option if your lifestyle demands more flexibility. If you need to relocate due to work or any other reasons, you’re free to do so. Whereas homeowners need to either sell their property or put it up for rent.
It would be best to rent if you’re the type of person that has trouble settling in or constantly looking for opportunities in other cities or countries.
So, should I rent or buy a house?
Owning a property requires more financial commitment compared to renting. If you’re looking for more flexibility, renting is the best option. Make sure to consider the above factors and weigh all the pros and cons of renting vs buying before you make a decision.