Yes. It is possible to buy instead of renting an apartment, especially if you plan to reside there for an extended period. You decide to pay a mortgage for the unit, which is usually less than the rent payable per month.
But, to buy the home through mortgage financing, you will be required to pay more for the down payment than you would for the lease. The FHA (Federal Housing Administration) insures government-backed mortgages, and it requires an initial deposit of not less than 3.5% of the property’s selling price. On the other hand, you will be required to pay a down payment of 20% when you go for a conventional loan that the government does not back.
This article highlights factors to consider before buying, the benefits of buying an apartment, and the costs associated with buying. Read on!
Factors To Consider Before Buying An Apartment
Before deciding whether to rent or buy an apartment, you must consider some aspects to avoid making regrettable mistakes. The following factors are worth looking at;
Your Rent Vs. Buying Budget
Buying a home is sometimes costly than renting one due to the associated costs like down payment, moving & closing costs, renovations, and maintenance charges. To see whether it is cheaper to buy than rent an apartment, you need to add up the costs involved, including the taxes and mortgage interest. There are also other charges, such as homeowner’s insurance and association fees, which make the cost of purchasing a home go higher.
But, in the long run, it is cheaper to buy than rent, and you also get a chance to build your equity. Your home may also increase in value if you intend to sell it later.
The Period You Intend To Live In One Place.
The number of years that you plan to stay in the same place also plays a great role in deciding whether to rent or buy a home. For example, if you will live in a location for five years or more, it makes sense to purchase a property. But, if you will shift from an area before five years are over, you may consider renting. When you rent an apartment, you will have the flexibility to know the different neighborhoods.
You don’t also want the inconvenience of buying a home, then start looking for a buyer after only a few years. It could be quite costly considering the moving, closing, repairs, renovations, and other costs that would increase the house’s value, making it difficult to sell.
Before making up your mind about purchasing a home, it is necessary to evaluate your situation and know whether you are likely to move soon. For example, if you plan to expand your family (by getting more kids), you may need a bigger home, so buying may not be the best option.
Renting and buying an apartment comes with risks worth considering before deciding. For example, if there is a downturn in your area’s real estate market, you will likely lose money. Also, if something comes up that requires you to sell your property sooner than you had intended, you may not recover the renovations and closing costs. But, buying allows you to build equity and so not a bad idea in the long run.
Conversely, renting has its downside, like you lose the opportunity to build equity. You also risk paying more if the rental charges go up, and the property owner may ask you to move out before the time you intend to live in that area lapses. Renting means that you will also have to bear maintenance costs, increasing your monthly expenditure.
Your Financial Situation
Before you can settle on buying or renting a home, it is necessary to evaluate your financial situation. You don’t want to initiate a process then give up because you cannot afford it.
Your security and that of your family is of paramount importance when looking for an apartment to purchase. The building needs to be in a secure location where crime is not an issue, and it also needs to have security personnel guarding it all the time. There should be firefighting equipment on sight, safety evacuation plans, and restricted access as additional security measures.
What Are The Benefits Of Buying An Apartment As Opposed To Renting?
Purchasing an apartment instead of renting has several benefits, including;
It Helps You Build Equity
It is easy to build equity when you buy a house, unlike renting. You gain equity when your home appreciates in value and as you continue repaying your loan. Building equity has advantages since you can borrow against it, get cash out, or refinance your mortgage.
You Can Do What You Desire.
Renting a home limits you on your improvements compared to having your apartment. You can also not choose the color of your walls or appliances, which is not the case when you buy a condo. You will also not be forced to fix damages unless you are willing to do that.
Buying A Home Potentially Minimizes Your Tax Burden
When you are paying a mortgage, it is possible to subtract the payable interests from income tax. You can also deduct closing costs related to the advance payment of interest. If you decide to use your home as a workplace, you will likely take exemptions. But, you need to consult a tax advisor to know what best suits your situation.
Freedom To Choose A Suitable Location
Buying your home gives you the freedom to choose a suitable place to live in. To find the best, you can compare different regions and neighborhoods, including rural areas.
Owning a home assures you of privacy, unlike when you rent. You will not have to worry about nosy neighbors who may want to interfere with your personal life.
What Are Some Benefits Of Renting As Opposed To Buying An Apartment?
Renting an apartment also has some benefits as compared to buying one. The following table compares some aspects of renting Vs. purchasing
Renting An Apartment
Buying An Apartment
Freedom to relocate or move after the expiry of the lease
You don’t have the freedom to relocate since it may take time to sell your home if need be. You may also not be free to take a job in a different location.
Flexible credit requirements
Strict and sometimes complex credit requirements
Minimal maintenance costs (mostly the charges are on the property owner)
You will shoulder all repair and maintenance costs such as leaking taps, non-functioning toilets, flickering lights, and more.
Proximity to essential services such as cities, restaurants, stores, and other attraction sites
Your home may be far from essential services.
What Are Some Costs Associated With Buying An Apartment?
It is necessary to know the costs of buying a home so you can organize yourself properly. Some of the expenses include:
Home sellers always ask for a down payment from buyers, which is normally a certain percentage of the selling price. This amount could be as little as 3% which means you will also pay for mortgage insurance. Some sellers may also require you to pay a minimum of 20% as an initial payment, but this will exempt you from paying mortgage insurance.
When you buy a home through a mortgage, you will make some monthly payments towards the balance. Some mortgages have fixed rates, while others are not fixed. It is necessary to choose the best arrangement to make long-term budget plans.
Repairs And maintenance
Before buying a home, you need to factor in repair and maintenance costs. It would help if you thought of unforeseen expenditures should anything go wrong and also periodic maintenance such as landscaping, lawn mowing, painting, and others.
There are some costs related to purchasing a home, such as legal fees, appraisal, inspection, loan origination, title fees, among others. Ensure that the seller or the agent discloses to you everything required from you before initiating the buying/selling process.
Depending on your home’s value, you will be required to pay property taxes annually. These costs go towards supporting services for the community where your home is based.
As a homeowner, you will also be required to pay for utilities such as sewer, gas, water, electricity, garbage. You may also have to pay for Homeowner Association fees in some cases.
A homeowner must insure their property against damages such as fire, weather, and vandalism. Therefore, you will need to budget for such costs when deciding on buying an apartment.
You can buy an apartment instead of renting one. But, it would help if you did due diligence to get the best property that suits your family and you. Before buying a home, you need to consider several factors like the duration of time you need to be in the same place, whether you intend to sell it in the future or not, and your financial ability, among other factors.
Once you are certain about buying a home, you can look for properties in your desired areas and the type you want.