When it comes to making a decision about where to live, a common debate is whether to rent or mortgage a property.

Both options have their advantages and disadvantages, and it is important to carefully consider your personal and financial circumstances before making a decision. In this article, we’ll take a detailed look at the key factors to consider when choosing between a lease and a mortgage, so you can make an informed decision that fits your long-term needs and goals.

Mortgage

Imagine you buy a house valued at $200,000, with $40,000 (20%) down and the remaining $160,000 financed with a 25-year mortgage at a fixed rate of 11%. Your monthly mortgage would be roughly $1,600, including life insurance and fire and earthquake insurance. With each payment, you build wealth and get closer to owning your home.

Let’s look at the advantages and disadvantages of a real estate mortgage:

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Lease

If you rent a house valued at $200,000 for $1,500 a month (a general rule of thumb is that rent is usually between 0.75% and 1% of the property’s value), you won’t have to worry about property taxes or maintenance costs. Much of the benefit that can be enjoyed is related to how favorable the lease clauses are. This allows you to have a clear idea of ​​your monthly expenses and plan your budget more effectively.

Let’s consider the advantages and disadvantages of renting real estate:

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So: What is the best option?

It is always advisable to look at several options in order to be able to conclude whether the property of interest is overvalued than the rent, and is therefore more suitable to obtain a mortgage. Or vice versa, given the value of the property, I get the best rental instead of a mortgage.

Usually the monthly payment values ​​are very similar between a lease or a mortgage, but in certain cases there is the possibility of finding an arbitrage depending on the opportunity costs.

Keep in mind that every situation is unique and it is important to carefully evaluate your financial goals, personal circumstances and financial ability before making a final decision. (OR)