Buying or renting a house, what's the best option?

In today's context, both buying and renting a home present different advantages and challenges. In Portugal, families face macroeconomic uncertainties, but continue to experience major life changes that often require a change of residence: whether for a first home of their own, to welcome a new family member, a change in workplace, a divorce or adjustments to the economic and financial situation.

There are many reasons why people need a new home and the first decision they have to make is whether to buy or rent.

The motivation for buying or renting a home varies according to each family's individual needs and goals,

It's important to consider all the issues involved, including the advantages and disadvantages of each option, in order to make an informed decision.

 

BUYING A HOUSE

Advantages of Buying a House:Investment in own assets: Buying a house is an investment that can be considered a savings account or savings for the future, including retirement.Appreciation potential: Houses have the potential to increase in value over time, offering a significant financial gain and serving as a hedge against inflation.Greater stability and security: Property offers greater stability, not being subject to rent increases or changes in lease conditions.Financial incentives: There are programmes and financial support, such as "Casa Joven", which encourage house purchases, especially for young people with financial difficulties.Economic climate

. a reduction in interest rates in the second half of 2024 - which could be extended over the next two years - is also a complementary incentive to buy a house, experts add

. Inflation is falling: in the last two months of 2023 there were figures below 2%, so the cost of living is stabilising;

. Euribor is showing signs of falling: And this downward trend in Euribor "will make it possible to have a lower interest rate, which will make home loans cheaper;

Several bank financing options: banks are reducing the spreads on home loans in order to attract more customers, according to the BdP. They have also adjusted their mixed-rate offers, which are the most sought after by new borrowers - they already account for more than 60 per cent of new home loan contracts in Portugal.Personalisation and community integration: Owners can personalise their home according to their preferences and enjoy a sense of belonging and community.

Disadvantages of Buying a Home:

Significant initial investment: Buying a house requires a large capital outlay at the outset, including down payment, commissions, insurance, taxes, and other expenses.Long-term financial commitment: Owners are bound by a long-term financial commitment, with regular mortgage payments, IMI and maintenance expenses.Ongoing responsibilities: In addition to regular payments, owners are responsible for the maintenance costs of the property over time. 

RENTING A HOUSE

Advantages of renting a home1. freedom and flexibility: tenants have greater freedom to move house as needed, without the long-term financial commitment associated with buying.

2.     Lower financial risk: Renting a home is a more affordable option for those who don't have the financial means to make a large initial investment in buying a property.

3.     Lower initial cost: Generally, the initial cost of renting is lower than the investment required to buy a home, as tenants only need to pay the monthly rent.4.     Lower maintenance responsibilities: Tenants have fewer responsibilities in terms of property maintenance and upkeep, compared to homeowners.Disadvantages of Renting a Home:

1.     Higher rent: The cost of rent can be significantly higher than the instalments on a loan to buy the same property.

2.     Personalisation restrictions: Tenants may have restrictions on the changes they can make to the property without the owner's permission, which limits the ability to personalise.

3.     Lack of stability: Tenants are subject to the conditions of the lease, which can result in a lack of stability due to the possibility of changes in conditions or termination of the lease.

4.     No return on investment: Unlike buying, where there is the potential for the property to appreciate in value, when renting there is no return on investment, as the payments are only for temporary use of the property.

 

To summarise, the decision between buying or renting a home depends on the individual needs, objectives and circumstances of each person or family. It's important to carefully weigh up the advantages and disadvantages of each option before making a decision.