Rent or Buy: Factors to Consider Before Making a Major Financial Decision

have a own property represents a major financial decision for many people. According to the Inegi, of the total households in Mexico, 21.1% (7.6 million) reported that one of its members plans to rent, buy or build a casa.

Unfortunately, not all people have the same economic capacity, because while some have the resources to buy a house —that is, they have an amount for the hitch and they can allocate an important part of their resources to a mortgage financing—, there are those who still do not have this solvency, but want a house to be part of their future and, to achieve this, they must use long-term savings and investment strategies.

Although at first it seems like a better option to buy a house than to rent it, because in the end the subject becomes the owner, in terms of numbers and benefits, it is always good Ask yourself and answer what is the most convenient.

To help us understand each alternative, Yave, the digital mortgage credit platform, shares different scenarios that must be considered if you are able to decide between the two, in order to know if it is better to rent or buy a home.

Lifestyle

• Consider renting… If you are in a work where you frequently need to change location or if you are a nomadic person. Also if you don’t like being in one place or if your job gives you the flexibility to do home office or workation (term used when you have the opportunity to work from places that are usually for vacations).
• Consider buying… If your job involves being in a full-time office, and if this job offers you a regular income. Remember that having a mortgage implies a long-term responsibility, therefore, it must be considered if you do not plan to change cities within the next five or ten years.

Depending on factors such as your job or your lifestyle, it is convenient for you to rent or buy || Source: Unsplash

Stage of life

• Consider renting… If you are starting to work and want to become independent. In these cases, renting a small space may be best. While you go through the process of finding job and financial stability, you will be able to get to know different areas of the city and choose the one that best suits your way of life and abilities. So later, you can buy a home.
• Consider buying… If you have Job stability and verifiable income. Also if you start thinking about having your own place for your retirement. Likewise, consider buying if you decided formalize with your partner and have already found a place where they would like to live. Remember that they can request a joint credit (co-accreditation), so the financial institution could offer them better payment conditions.

Financial situation

• Consider renting… If at the moment your income and expenses do not cover a mortgage payment. You can start to raise the money necessary for the down payment, which represents a significant amount of capital. It is important to keep in mind that buying a house is a long-term project.
• Consider buying… If your personal finances are healthy, savings accounts that can support you for the down payment —among other initial expenses—, you checked that your income can cover the monthly payment and it is an achievable goal that you already considered within your budget. Analyze your numbers and what it takes to request a financing. In addition to being in good economic health, you need to be aware that the Mortgage payment does not exceed 30% of your income per month, in order to avoid running out of capital to cover your basic needs.

The decision to buy or rent also involves evaluating your finances || Source: Unsplash

investment objective

• Consider renting… If at the moment you want grow your money before buying a home and you plan to place the capital in a investment instrumenteither to start a business or invest in real estate.
• Consider buying… If you want to grow your assets with real estate, which In the long run it will have higher surplus value. Also if having your own place is essential to provide security for your family.

“The answer of whether it is better to rent or buy depends on the financial situation in which you find yourself, the stage of life and future plans. It is not a question of indicating whether one option is better than the other, but of consider all aspects that influence your life to make a better decision, whether you prefer to rent and save to start building a road that later allows you to buy; or take advantage of the fact that you are already in a stable position, both financially and personally, to acquire a property.” indicates Bernardo Silva, co-founder and CEO of Yave.

If you want more information about the acquisition of properties and real estate, Do not hesitate to check the news we have in your little pig.