Buy VS Rent Guide
So you’re thinking about buying a home of your own. You’d like the freedom to modify your home as you please, avoiding all those pesky service charges and maintenance fees. But is it worth it? Will it be more economical? What if something happens to your house? What will be the maintenance cost?
Flexibility in payment: With mortgages, it’s easier to modify your monthly payments in a way that suits your unique circumstances. You can choose the type of repayment, the length of the loan and you can decide to make extra payments when circumstances are in your favour. For example, if you receive a big bonus or commission. All these things allow you to decrease your monthly payments (or increase them, if that’s what you want).
Household modifications: You can do anything you want to your home: make repairs, make additions and redecorate. Your house is your playground, free to shape as you please.
Down-payment: Mortgages require you to pay a down-payment before you can take a loan. In the UAE, UAE Nationals need to pay a minimum down-payment of 20% while Expatriates (UAE Residents) need to pay a minimum down-payment of 25%. This may mean saving over an extended period of time.
Mortgage payments: Mortgage payments are usually a little more stable than rents. Mortgages can be variable or fixed, but any change in payments is usually more stable than changes in rent. While payments may rise under certain conditions (if you have a variable mortgage and your lender decides to increase the rate), the increase is usually within reasonable limits. Check out our: ‘First-Time Buyer’s Guide’ for more information
Rental income and asset appreciation: You can rent out your property and create a source of additional income through rent. A property is an asset, similar to mutual funds or savings, which may appreciate in value over time. One of the benefits of buying a property is the ability to build equity. You may be able to realise such equity, which can be used for other expenses such as a family holiday, educational expenses for your kids, debt settlement etc. Please refer to Reschedule Your Loan Guide for further details.
Interest: Of course, you should be aware that interest payments over time can add up. Therefore, while a longer mortgage term may be preferable due to a smaller monthly instalment, you should know exactly how much interest you’ll be paying over the term of the loan.
Fees: Many mortgage lenders charge fees to process your loan and fees if you want to close it early or prepay an amount greater than your monthly payment. These fees can add up so make sure you know what you’re being charged.
Rental payments: In the UAE, rental payments are generally made through annual or quarterly cheques. These payments are not as hefty as mortgage down-payments, but can come to sizeable amount. Therefore, it’s important to clarify with your landlord the exact method of payment.
Rental negotiation: In many cases, you can negotiate with your landlord to avoid unreasonable rent increases. Landlords are human too, and know that if their rents are too high, they won’t attract tenants. If you live in Dubai, the Dubai Land Department offers a Rent Increase Calculator which provides an indication of whether your rents are within a reasonable range.
Maintenance: Letting your landlord take care of maintenance issues is a load off your shoulders. The landlord will handle all electrical, plumbing, lighting issues. Sometimes, they may even take care of a new paint job.
Rental fees: Landlords typically pay maintenance fees but tenants may see fees for maintenance, service and facility usage (if your accommodation includes gyms, swimming pools, saunas and other amenities). These are generally flat fees paid monthly or annually.
Flexibility: If rents are getting too high, you can leave your place and look for a cheaper one. If you don’t plan on staying in one place for more than 5 years, or if you’re financial or geographical circumstances aren’t the most stable, then renting may be a better option.
Moving: One of the big headaches of renting is packing your bags and leaving. If you’re leaving places often, you have to pack up, and move to a different area, organize the moving company and set up again in a different area. Humans are creatures of habit, and moving disturbs your daily routine creating unnecessary stress.
Ultimately, you’ll have to make a choice that suits your lifestyle. We hope this guide has made that decision easier for you.
|Fees (before you reside)||
|Fees and expenses (after you reside)||
|Down-payment||Pay a minimum down-payment of 20% for UAE Nationals and 25% for UAE Residents of the property value (refer to Essence Leaflet).||Pay the rent in one cheque or four cheques.|
|Household modifications||Need a NOC from the developer but much fewer restrictions than renting.||Restricted – may be able to make superficial changes and need NOC from the landlord and developer.|
|Flexibility in changing property||Switching properties is limited by being able to find a buyer and a new property in your price range.||Switching properties is limited by the end of the lease period and finding a new property in your rent range.|
|Susceptibility to market fluctuations||Depending on the type of mortgage you have, monthly payments may increase or decrease from year to year. In addition, the value of the property may also change from year to year.||Rents will usually trend upwards from year to year unless the property market undergoes a downturn.|
|Adjusting monthly payments||Mortgage payments can be modified by adjusting the term, making partial settlements, or requesting a lower interest rate.||Rents usually trend upwards every year but can be negotiated with the landlord. However, if you want a cheaper rent it is likely you will have to move out.|
It’s useful to keep an eye on the property markets, as their movements can influence your decisions. There are times when prices and rents are rising, and other times when they are falling. While there is no strict “best” time to buy or rent, there are moments right for you as an individual. A good way to become a savvier buyer is by keeping an eye on the Property section of the newspaper and checking where the prices seem to be heading. Property reports by companies such as Colliers and Asteco also provide market trends. Check out our First-Time Buyer Guide for more information.
Information in this guide is intended to provide general information on a particular subject(s) and is not an exhaustive treatment of such subject(s).