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Is it better to buy a home?

Careen McKinon, Provincial Sales Manager from ooba, South Africa’s largest bond originator, says that the rising interest rate environment is making it difficult for South Africans to afford buying a home. She suggests weighing up the financial implications of buying your own property versus the long term impact of renting.
 
Consider your long term goals
 
Consider whether you see yourself renting or owning your own home within the next five to 10 years. This will help you in putting a plan in place to be able to afford the type of home that you want to live in, should you want to buy. Remember that buying a home may offer you more security in the longer term, as you do not have to answer to a landlords, leasing agents, or similar third parties.
 
“If you are renting and the owner of the home decides to sell, you may be forced to move, which may negatively impact your stability. Living in your own home gives you more freedom than having to answer to third parties,” says McKinon.
 
Does buying offer you a return on investment?
 
Property is likely to accrue value over time so, if you buy, you're in a better position to make a return on this investment.
 
“As an owner, the increasing value of your property affects you positively whereas if you are renting, you are essentially helping someone else pay off their bond,” adds McKinon. 
 
If you rent out your property, you can invest the rental in your bond, but you won’t be able to sublease a property that you are renting from someone else, as most rental agreements prohibit this.
 
Your own home gives you freedom of choice
 
“Often, when you are renting, the owner needs to give you written consent to change anything within the property, such as putting in hooks for pictures or replacing an old rail. The fact that the owner has the final say may feel very limiting to a renter,” says McKinon.
 
By owning your own home, you can make additional income either by building onto the existing property, or renting out a granny flat or something similar.
 
Also, if you are a business owner, you may be able to use your home as a start-up office. You’ll be able to save on business property rental by factoring this into your business plan.
 
No more rental increases
 
Standard rental agreements allow for annual increases of between 5% and 10% per year which could leave you out-of-pocket and potentially looking for a new home as time goes by. When it comes to owning your own property, you won’t be liable for annual rent increases, and you may be able to fix your interest rate during a rising interest rate environment. This will help in keeping costs down.
 
“In addition, owning a home offers you financial security and benefits your credit risk profile. This is especially important when it comes to acquiring finance for things such as a motor vehicle or even a second property,” concludes McKinon. 


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