According to a CBK report, there has been poor uptake of mortgages in the market, reasons cited included:
- High cost of housing/properties
- High interest rate
- High incidental costs (legal fee, valuation, stamp duty)
- Low level of income
Today, we will be sharing a few reasons why renting is not bad after all. Don’t beat yourself up if you cannot afford to buy a home.
1. Rents are cheaper than mortgage repayments
The decision between, renting and buying a home is a highly debatable one. The truth is somewhere in the middle, it depends with where you are. Whether or not renting is cheaper depends so many factors like where you live, the housing market, rental prices and so on.
2. Eligibility for a mortgage
Currently, there are high numbers of unemployment in the country and across the globe, people are living from paycheck to paycheck; only a small fraction of the population can say they have a stable monthly income.
Remember to qualify for a mortgage, you have to prove to a bank that you have a stable and steady income to ensure that you will actually be able to service the mortgage. If your monthly income is a unreliable then you are better off renting and building up your credit profile.
3. Taking a mortgage ties you down financially
Typically, most mortgages require an initial deposit of at least 20%, but you may find some banks advertising up to 105% mortgage financing. Whichever option you pick remember, taking a mortgage means you will be paying off a debt for as long as 20 years with the average rate of 10.5%- 18% annually varying from bank to bank. If you have a fixed monthly cash outflow, it can be very challenging trying to accumulate any savings for other investments.
Don’t get us wrong, owning a home is a great investment in the long run, but renting gives you the freedom to sink your money into other income generating investments. Investments that may allow you to accumulate enough finances to buy a home upfront in a few years or enable you to service the mortgage much easier.
4. Renting allows more flexibility
Sometimes you may just want to upgrade to a bigger home, a better neighborhood, change scenery or simply to move closer to other amenities like your children’s school. Committing to a mortgage will therefore tie you down on where to live.