Are you stuck in a rental trap?
Are you renting a home because you are not sure of your future plans? Or, have you just started a career and haven’t built up enough credit history to qualify for a house of your own?
Whatever the reason, there is no long term benefit to renting a house. When renting, all you are doing is paying out your hard earned money to someone else and, at the end of the day, you will be left with nothing to show for it.
So, what do we mean by a rental trap?
Rental in the affordable housing market typically comes in at around 80% of the equivalent monthly bond payment, so it is very tempting to take the cheaper option and not look at the long-term picture. The main difference is that bond payments stay CONSTANT over the period of the bond, whereas rental amounts increase every year and typically by 8%. Here is an example:
|Rental payments||Bond payments|
|Year 1||R5 500||R6 500|
|Year 2||R5 940||R6 500|
|Year 3||R6 415||R6 500|
|Year 4||R6 928||R6 500|
As you can see by the above example, although the rental is R1,000 per month cheaper in year 1, by year 4 (and every year thereafter) the bond payments get increasingly cheaper than the rental amount, because your bond payments never increase.
Now, lets look at how much you benefit by owning your own home over 20 years:
If you rent a 2 bedroom home for 20 years, you will pay about R3,200,000 in rental.
If you buy the same 2 bedroom house and pay monthly bond payments over 20 years, you will pay approximately R1,700,000 in bond repayments (saving you R1,500,000!). In addition to this, at the end of the 20 years, you will OWN the house which should have increased in value by approximately 10%. So, in 20 year’s time your house could be worth R3 million.
In summary, if you take the difference in the payments you make on buying vs renting a home and you add the value of the house that you own vs having nothing to show for your rent at the end, then over 20 years, you are R4 500 000 better off by buying your own home. The decision is easy… Don’t get stuck in a rental trap. Buy a home today!
Contact us and let’s chat about a home you can invest in.
Capital Hill Estate is an exciting, secure development in Pietermaritzburg. Choose your plot and let us build you a home customised to suit your budget and lifestyle requirements. If you wish to live in a secure Estate and ensure that your house value increases, then invest in a home in Capital Hill Estate.
*NEW* Apartments from R400,000 and Houses from R632,500.