How to make the right choice between buying and renting a home ?

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Rudolphe ABEN

How to make the right choice between buying and renting a home ?

The age-old question of whether to buy or rent a primary property persists. A renter who does not have the notion of "losing money" should not feel compelled to become a landlord. Each choice has advantages and disadvantages that one must be aware of and weigh against one's personal situation and long-term financial outlook, as well as the economic climate of the area in which one is considering moving.

This decision depends on your personal situation

Renting is convenient for nomads because it requires little long-term commitment. A lease often lasts only a few years, is easy to get rid of before it expires and does not tie up too much money. Both personal and professional factors can contribute to this type of transience, such as a desire to constantly explore new places and experiences or a reluctance to settle in one place (frequent moves, ongoing career without geographic stability...). In addition, renting is quick and easy, as there are few administrative hurdles to overcome. Especially after the birth of a first child, many people decide to buy a home to ensure their family's financial stability for the future.

Costs associated with renting or buying

Renters are only responsible for the monthly rent and utilities (water, gas and electricity) (taxes, condo fees, work, improvements...). Thus, this choice entails less risk than a purchase and occasionally allows the constitution of a modest capital, allowing the conception and realization of future projects. However, buying is considered a longer-term investment, and the monthly payments can be similar to renting if the loan term and interest rate are well calibrated. The only real difference is that at the end of the loan, the subscriber actually owns the property. Don't forget that this acquisition project can benefit from financial aid from various grants and bonuses. A buyer commits more financially, with this part of uncertainty linked to the evolution of the real estate market that he must accept, whereas a tenant can have the impression of "throwing money out of the window", even if paradoxically, it can also allow him to put some aside for other projects.

Economic and geographic factors

Thinking about the city in which you want to live is critical to your decision to rent or buy a home, as the economic potential of the city can influence your decision. While real estate prices in Luxembourg tend to rise everywhere and every year, in some areas they are so high that any benefit from a purchase would take years to realize. However, in other areas, the payback period is shorter, making the purchase more financially viable.

This predicament is common, and it persists in part because there is no single answer to the question posed. Beyond location and economic climate, individual and financial considerations weigh heavily in the decision to rent or buy a home.