To get a mortgage for a house or rent, that is the question?

To get a mortgage for a house or rent, that is the question?

Mortgages Pic

Mortgages

How does one decide whether to get a mortgage for a house now, later, or rent a place instead? this is a dilemma that many first-time buyers are contemplating.

Obviously, the lack of housing is a factor, which in turn, drives up the price of the existing property stock.  This coupled with the current state of the housing sector means that Home Ownership is falling. For example, more people under the age of 40 are renting than ever before and if this continues, it will have a major effect on the net worth of people in this age group.

In mainland Europe, renting long term rather than purchasing your house is a common practice, but at what cost?

Dermot Staunton, one our qualified financial advisors has provided the following example using the cost of a mortgage versus renting over a 30 year period.

Renting

€1,312 per month rent @ 2% inflation  = Total rent paid over the 30-year term of €651,000.

Mortgage

Assume first time buyer, and mortgage rate of 4% is fixed for the 30 years.

House Price is €305,555 and receives 90% mortgage of €275,000

Therefore, monthly repayments are: €1,312 per month (as per above rent)

Total cost of Mortgage over the 30 years: €472,000

Summary

Total rent paid is €651,000

Total cost of Mortgage €472,000.

The result is that you are €179,000 better off, plus you have a property asset potentially worth €553,000 (assumes modest growth of 2% per annum and excludes any maintenance cost over the period.)

In short, your estate could potentially be worth €732,000 (€179k + €553k) more by purchasing your home rather than renting!

Talk to us about a mortgage and we will help you make the right decision for your circumstances.

You can call the Galway Office on: 091 759500 or Kildare Office on: 045 888088. Alternatively, Request a callback by email today.