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At some point in life, most of us would have to contemplate the question of whether it would be better to rent or to purchase property when we wish to settle down. Putting houses bought mainly for their investment potential aside, the deciding factor for most of us would be a question of price. This could be in turn influenced by a myriad of other factors such as your intended duration of stay, the type of property in question, the size of the immediate down payment required, and so on. In some countries, including Singapore, the type of property you wish to purchase could also be subject to certain restrictions. To make the decision easier, begin by considering five simple questions to get a sense of all your options.
1. How long do I plan to live in the same property?
The most important factor that should inform your decision to rent or purchase, would be the amount of time that you intend to live in the property. The longer you stay in one place, the better it’d be for your wallet in the long run if you were to purchase a house. The converse holds true as well: If you sell only after a year or two, it’d be difficult to profit or breakeven after factoring in the costs of buying, renovating and maintaining the house. Also, while you are likely to face rising rent costs over the years, if you had elected to buy rather than rent, the purchase price remains the same. Unfortunately, should you change your mind and decide to cut your stay short, it will take time and effort to sell your house, which may not even result in you reaping those cost savings you had envisioned. Renting on the other hand, is a much simpler and direct process, and would allow you to extricate yourself with minimal difficulty.
2. How stable is my situation?
While this is linked to the previous point, asking yourself this question ensures that you have truly considered all the possible life-changing options that may affect your decision to rent or buy. Even if you have truly found your dream house and are able to afford buying it, would you be able to afford paying for it if you lose your job? Would you be able to make your monthly mortgage payments while you search for new employment? What if you were to purchase a new house with your spouse? Would you be able to sell off your house without incurring a loss? If you aren’t certain about your financial stability or the security of your job and industry, or are contemplating making major life changes in the next few years, it could be a better idea to rent instead of purchase.
3. How important is it to me to live in my dream home?
We all want to return to a place we call home at the end of the day. If you are the sort who secretly dislikes the idea of sharing your house with strangers, or someone who hates feeling on edge the moment the landlord pays a surprise visit, you may want to consider buying a place of your own just for that additional peace of mind. And it’s not just personal freedom and privacy that a home affords, but also the unlimited possibilities in remodelling your nest whenever you’re in the mood for change. A new paint job? No problem. A remodelling of the guestroom into a study? Why not? However, if you don’t sweat the small things and are happy with your current lodgings, or love exploring new apartments and neighbourhoods every couple of years, renting might be a better decision for you.
4. How much can I afford?
Unless your day job involves printing money, it’s fairly likely that you’d be taking out a bank loan once you have committed to purchasing property. However, bearing in mind that the maximum bank loan possible is only 80%, you’d have to consider if your financial situation allows you sufficient flexibility in meeting payments while maintaining your current lifestyle. And it’s not just your down-payment or monthly mortgage payments that you’d have to consider. Chances are, when you rent, your landlord is the one picking up the cost of miscellaneous household repairs and is perhaps even footing the utility bills. Factor in these miscellaneous costs when doing your sums to see if buying or renting is a better choice for you at this point in time.
5. What sort of property do I want?
An unusual Singaporean consideration when it comes to buying property would be the precise type of housing that one wishes to reside in. Since the Residential property Act of 1973, restrictions have been placed on foreigners who wish to buy property here in Singapore. The Act governs the purchase of property by non-citizens who are either temporary or permanent residents here in Singapore. Several types of property are off-limits, such as landed property, including bungalows and terrace houses, and property in buildings which have fewer than six levels. Those whose dream homes comes with garden fences and private swimming pools should consider renting these gorgeous houses instead.
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