To buy or to rent? Which is right for you?
To buy or not to buy? It’s common to see people in Hong Kong struggling between renting and buying their own home. Before making the decision, let’s weigh the pros and cons and see how you should prepare your financial plan!Why is Buying a House is a Good Idea?1.Long term investmentIn Hong Kong, the most common way to accumulate wealth is through homeownership. Buying a property can be an investment that allows you to have rental income. If the property's value increases, you can also benefit from equity appreciation.2.You are free to customize your own homeYou are free to live however you want! You can have pets, change appliances, or even renovate your house, and no one can stop you.3.StabilityOwning a house can give you a sense of stability and settlement. There is also the pride of owning a property!Risks of Buying a House1.Long term commitmentGetting a mortgage requires a substantial down payment and monthly repayments of up to 30 years, a long-term financial commitment.2.Additional Monthly ExpensesOwning a house means more responsibility. You must pay for your building renovation fees, property taxes, and maintenance fees. Accumulated monthly expenses can be a huge cost.3.Less mobilityWhile buying a house offers more stability, it will be more challenging to accept an attractive job offer if it is located far from your home. Unlike renting, you can't just move whenever you want.Why Renting a House is a Good Idea?1.Ease of MovingYou can move whenever and wherever you feel like after the lease's fixed term depending on your financial or other circumstances.2.No/minimal maintenance and repair costsTenants are usually not responsible for fees related to repairs, appliances (e.g. air conditioners) and management. These are typically paid for by the owner.3.Low upfront costsYou don’t have to write a big check for a down payment to get a mortgage. You typically need the security deposit, which is usually the cost of 1-2 months rent.Risks of Renting a House1.Possibility of evictionIn a rented house, you’re at the mercy of the landlords as legal owners. If they decide to sell the house, you’ll probably have to move out.2.You can’t renovate the propertyAs a tenant, you are limited to what changes you can make to your home. If your home looks dated, you may just have to get used to it.3.Rents are subject to changeYou may be comfortable with what you are paying each month, but your landlord can increase the rent anytime your contract is over.4.Renting does not accumulate wealthThere is no investment in renting. When you leave the rented property, all you take is yourself and the moveable property that belongs to you. The property owner’s equity will grow, but yours will not.So, which is better, buying or renting?Although money plays the most important role in deciding whether to buy or rent a house, it is not just about money. Many other factors play a part in deciding which to choose. Questions like how long you expect to stay in the house, your future career goals, your life plan etc., all play a role in your decision.If you think it’s time to settle down in a specific location, buying a house may be a better option. The next step for you is to work out how much you can afford to borrow and how much you need to save.If you still believe there are many places in the world you want to explore or plan to immigrate, renting is most likely the best option since it provides you with higher flexibility.To have a better credit rating for mortgage or loan, start to manage your spending by using WeLab Debit Card!