To rent or to buy

2015-05-05 06:00



property PHOTO:

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Buying a home for the first time is a big decision. And all aspects of this financial and long-term commitment should be considered carefully, including whether buying or renting will put you in a better ­financial position.

“There are many different aspects to take into account when considering buying. This is especially true in the affordable housing market where 96% of our customers are first-time buyers. This means that almost all our customers are making the leap from renting to buying for the first time,” says Simphiwe Madikizela, head of projects at a national bank.

Here are a few guidelines which outline the fundamental differences between renting and buying.

Finances when buying

How you are doing financially is possibly the most important factor when deciding to buy a home for the first time.

Buying a home attracts upfront costs, which need to be budgeted for. For example, a R500 000 home will require R10 000 in bond costs, which is the amount to register the bond with the Deeds Office. While there is no transfer duty on this amount, which is the tax owed to SARS, there are still transfer costs of R12 100, which are the fees paid to the conveyancing agency for its services.

If you secure an interest rate of prime plus one (10.25%), your monthly repayments on a R500 000 loan will be R4 900.

“However, these are not your only monthly costs,” says Madikizela. “As a home owner you are also responsible for rates and taxes, levies (if your home is in a complex), water and electricity as well as household insurance for the goods as well as the structure.”

You should budget a little extra to be safe, suggests Madikizela. Maintenance of the property is up to the home owner. If you are buying, make sure that you budget for ongoing maintenance.

Finances when renting

When renting a property, you will need to provide a deposit, which is normally a month’s rent, in addition to the rent for your first month. This deposit is used to cover any damage when you leave the unit or house.

Once the deposit is paid, you will only be responsible for paying your rent and utility bills, electricity and water, on a monthly basis or as set out in your lease agreement.

“It is very important for renters to also note that they will, in the majority of cases, be expected to have their own household insurance in place. This is to cover your own personal goods that are in the rented house in the event of a burglary or a fire,” says Madikizela.

Best decision for you

“This will never be an entirely straightforward decision,” says Madikizela. “If you are able to afford the bond and the additional monthly payments as well as the money for added costs then you are probably in a good position to buy.”

When will renting put you in a better financial position?

Buying is a long-term commitment, and it isn’t an easy process to sell a house, which may actually put you on the financial back foot if you have to sell in a relatively short period.

However, if you are renting, Madikizela suggests that you build up your financial position with the outlook to one day be a home owner. “There are advantages to both renting and owning your own house,” concludes Madikizela

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
NEXT ON NEWS24X publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.