rental cost v ownership, buy or rent?

H

house_wanabe

Guest
Hi,
I'm looking to rent or buy at the moment. Not sure which.

Looking at exactly similar apartments one for sale, one for rent.

For Sale 1-bed 265,000 euros
Rent identical for 1000 euros per month - (same dev. same aspect same size etc)

Would anyone agree with me that it's much cheaper to rent for now?

Even at 3.5% interest rates it is at least 300 euros more expensive to buy.

Am I looking at this in the wrong way??

For the gory details:
I have 130k saved and a fully paid up SSIA maturing in early 2007 and I'm evaluating the options

Thinking of
(a) renting 1-bed as above
(b) putting down 100k deposit and having a 160k mortgage on one bed
(c) buying 2 bed apartment or house for up to 340k with 100k deposit and 240k mortgage

Not sure which option to go for but still think there will be at least a moderation on prices or at worst a 20% fall.

What alerts me to a potential crash is the difference in valuations between rental and buying - any views on this welcome

Gar
 
go for it! you are better off buying your own home than paying rent and financing someone elses mortgage. If you want to keep the repayments down, you could consider an interest only option for the first 3-5 years.
 
Buy.
Your rent may go up in the next ten years.
Your mortgage might too, but at least your landlord cant send you a letter one day telling you to leave and you own the place at the end of it.
You can also rent a room if the going gets tough.
 
How long do you reckon the apartment would meet your needs? If you'd be happy there for a few years, you should definitely buy.
 
Some of your mortgage payment is a capital repayment; since you are paying down your loan, it is not a cost as such comparable to paying rent. In comparing the costs of buying and renting, you should compare only the interest payments to the rent paid. You should also add to the interest payments the other costs of ownership, the main one being the management company payment. When you compare the interest and other costs of ownership to the rent there may not be a huge difference. The benefits of ownership usually arise over time. Rents (usually) rise over time; the costs of mortgage can also rise and interest rates will most likely rise. However, over time rents are prone to ongoing increases while mortgage payments do not rise in the same ongoing way and usually over time will fall behind income growth. The other financial benefit of ownership is potential capital appreciation.

There are other considerations. There is a sense of security from ownership; conversely renting has a benefit of flexibility.

I would agree with Rainyday that if you are planning to stay in the apartment for a number of years that it's best to buy. There is the risk that prices could fall but I would still be inclined to buy if you are planning to be there for some years.

Noel
 
What happens after 3 years you are left with a property that maybe depreciated in value and not be able to sell it? A ball and chair around your neck hassle if you are away for lengthy times when you want to travel for work or leisure and having to arrange for someone to keep an on it.

A mortgage will have to be serviced for years and if you cannot let it then that is another hassle. Lots of things to consider when purchasing a house and not sure what you will doing for the next couple of years think long and hard..
 
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