3 Ways Renters Lose Money
Are you still renting a home or apartment for yourself or your family?
If so, you’re losing money. Think about these three ways you lose money by renting:
1. You’re paying for someone else’s mortgage payment.
You’re missing out on the appreciation that the property gives to the landlord. Appreciation is a term used in accounting relating to the increase in value of an asset, which means in real estate terms, added value to the property. Over the past five years, houses appreciated significantly, making many new real estate investor multimillionaires.
2. Renters don’t get to freeze their monthly housing expenses like home buyers can.
Of course, many home buyers get mortgage payments with adjustable interest rates and their payments go up over time. However, these payments will not go up over the long term like rising rents. Just think about how much an apartment costs today compared to ten years ago. A two bedroom apartment in Cebu City (for example) leases for 15,000 pesos today. The exact same apartment rented for 3,000 in 1996, when it was brand new. Home buyers who had low monthly payments in 1996, who did not refinance their mortgage, enjoy low payments and don’t have to worry about rising rents.
3. Renters don’t benefit from tax advantages.
Home owners get income tax deductions. Tax deductions for interest costs, for instance, save tax payers thousands of pesos.
Emotional Satisfaction of Home Ownership
Besides losing out on making money with real estate, renters don’t get the same satisfaction of home enjoyment that benefits home buyers. Many landlords won’t allow you to paint your walls in colors that you desire. Also, you won’t feel like fixing up the property with custom window coverings and you get little say in flooring materials. Because you can’t make your personal statement, you won’t feel like you’re HOME as much as home owners who feel emotionally connected to their property.
How to Buy Your First Home
The biggest barrier to home ownership is often accumulating funds for a down payment. People think they have to have thousands of pesos for a down payment.
- In the Philippines, pre-selling properties or projects have down payments that are payable by installment, stretched from 12 up to 60 months depending on project and developer. You do not really have to shell out a big amount of cash at once.
- Developers also offer discounts for those who can pay for the down payment one time. With today’s mortgage finance plans, you may be surprised to find out how much of a home you can afford with payments similar to what you currently pay in rent.
You may have to go out of the major metropolitan areas to buy a home. That’s why so many people commute in neighboring Municipalities. Affordable housing costs much less in outlying areas. But so do the rents. If you’re renting an apartment for P 15,000 in Cebu City, you could buy a 1.5 Million Pesos home in Lapu-Lapu City or Consolacion with a mortgage of as low as 8,000 pesos per month. I purchased a home in January of 2015 and my mortgage payment, for a 23 sqm new home (it’s a socialized condo) in Cagayan de Oro, costs less than 3,500 pesos per month. With my tax savings, I pay even less than renting a small apartment or pad closer to downtown Cagayan de Oro.
If these amounts sound high to you, check your local area. Perhaps your monthly rent is only 10,000 pesos and houses cost less than 2M. Talk to a realtor and see how much of a home you can afford.
If you’re renting, make one of your priorities to buy your own home.
Charmaine Xy-Za Yape is a founding member and a blogger of Filipino Homes. She is also a PRC and HLURB Registered Real Estate Professional and a Licensed Financial and Investment Advisor. She is an International Realtor member. She is a Hubspot certified in Inbound Marketing. She is also the co-founder of Iligan Bloggers Society, Inc.