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Many of us have been raised to believe that if you don’t own your home you are throwing money down the drain. However it is important to weigh your options considering your current financial situation in hand with what you will gain and lose by owning your home. Here 3-Wise bears, one of the leading firms of Accountants London can boast of offers their thoughts on things to consider to help you decide if it makes better sense to rent or buy your home:
Down Payment: First of all look at your savings and see how much you would have to put towards a down payment on your home. It does not make financial sense to buy a home if you cannot afford at least a 10 percent deposit on your home. And even then you will owe 90 percent of the cost of your home. Although this is not uncommon when buying a home it can mean quite a large mortgage you will be looking at which can eat away at the majority of your monthly spending. You will also be faced with a mortgage indemnity guarantee for lower deposits which means you will be paying higher interest. This can have a very negative impact on what you will be left with to spend which can mean no nights out, no nice clothes and no trips. Does this suit your current lifestyle? If you want to have a reasonable mortgage to manage you probably want a 30 to 40 percent deposit on your home.
Debt Ratio: You also want to consider your current debt. If you are debt free and your home will be the only debt you have to pay off it does not seem so bad. However if you have multiple credit cards and loans the payments you are making and interest you are paying could really do a number on your money. You have to make sure you are spending your money wisely, not just putting it all towards interest on your debts. As well if you have a high debt ratio chances are a bank won’t be willing to give you a loan anyways.
Savings: Many people consider their home as an investment. And it is. However if the only savings you have is the equity in your home you will be cash poor. Should an emergency arise from the loss of a job or major repair required on your home or car for example, you will not have an emergency fund to cover added expenses. This is not a wise way to live as it can put you into financially difficult circumstances and even lead to the loss of your house. If you are unable to save any money as part of the cost of owning a home it is probably too risky.
Consider how much money your rent gets you compared to a mortgage. This is not just the money itself, but where you will be living and how you will be living. If you currently rent a smashing apartment close to work and the amenities you love for a reasonable monthly payment it is hardly worth it really to make the jump to buy at the moment.