When it comes to deciding whether to rent or buy your own home, estate agents would often be heard saying this, “not everyone is cut out to buy and own a home.” Some people are just not either equipped well enough for home ownership for a variety of reasons. Would you like to know if you’re one of those who are better off renting? Here are a few things that could affect your decision.
Bad Credit Score
Is your credit report filled with discrepancies? Are you often in arrears in your debt? If your credit rating falls beyond the average or acceptable figure, you may be ineligible for a loan, or at the very least, find yourself offered rather high interest rates. Low credit rating will very likely lead you down the path of predatory lenders.
If you’re looking to buy your own home but you have bad credit, try on get it sorted for some time before taking out a loan. A number of delayed payments may be enough to make you ineligible for a loan. To find out your current credit standing, you might want to get in touch or visit credit bureau websites and see what you can do to improve such.
High Debt Ratio
Lenders generally look at two ratios: front-end – which is your mortgage payments plus taxes and insurance over your monthly salary; and back-end – which adds your monthly debt payments to your PITI (principal, interest, taxes, and insurance) payment before dividing the sum by your monthly salary. If this goes up to 50% (meaning half of your salary going to your debts), you have a high debt ratio, and may be deemed unqualified for a loan. While there are unscrupulous lenders willing to fund that kind of borrowing, you find yourself broke in the process.
Unstable Job or Relocation
How secure is your job? Even if you are earning huge sums at a young age, and you can afford mortgage repayments, as soon as you lose your job, you may lose your home to foreclosure.
Given the sometimes erratic movement of the working sector, your company maybe firing people (on grounds of redundancy) If you feel that your job is in jeopardy, consider how hard or easy for you to get a new job. Even if you receive unemployment compensation for a period of time, it may not be enough to cover repayments.
If you’re relocating within the next couple of years and have to sell because of it, your home’s value should at least (and hopefully) increase by 10% to cover the costs of selling, or you’re likely to lose money on the sale.
Maintenance
Every home needs to be maintained. Not everyone, though, can and want to do home repair and maintenance projects, hence hiring a professional is needed – which equates to additional expenses. We recommend that if you’re setting a budget for your home purchase, save at least 5% of the purchase price for maintenance and repair costs. Be sure to use a reliable contractor like Seneca Creek Roofing with a good track record so there are not surprise charges.
When You Can Save More on Renting
If your mortgage repayment would be three times more than how much you pay on rent, it may not be financially reasonable for you to buy your own house. Besides, home ownership needs careful consideration, first and foremost on your budget. Just because you believe you have saved enough for the deposit and upfront costs of buying a house, doesn’t mean you’re good. Remember that as the ball rolls along and you get close to moving in, other necessary living expenses should be in your priority list. You will need to budget for conveyancing fees, moving costs and a whole range of other costs.