If you are planning to rent for more than 5 years, you are better of to buy a property.
The number of people living in a rental property has tripled to reach 21.2% in Spain. Although this is still far from countries like Germany (52.5%) and Denmark (63.3%), representing a significant growth of buying versus renting a property.
Now it is far more interesting to buy a property, mainly due to low interest rates and expectations of revaluation.
Infinity Estates always advice our clients to take in consideration 4 important factors:
- Mortgage interest rates
- The rental price
- The period of time we are planning in front of us
- Investment alternatives.
From 45,000 euros savings available, consider a property for the price of 150,000 euros. The bank only finances up to 80% of the value, so the maximum amount that the buyer can borrow is 120,000 euros. This means that, at the time of purchase, the buyer must pay 45,000 euros savings having: 30,000 become brick (not lost, only transformed) and the other 15,000 are spent on taxes, notary fees, etc.
In the rental market this property would be priced at about 670 euros per month. At the time of signing the contract, the tenant pays only 670 euros deposit (which in theory are recovered in the future) and 670 euros for the current month (which they lost). In total, 1,340 euros and retains disburses 43,660.
At the end of the first day, the numbers clearly favor the rent. If we look five years later, the situation changes dramatically. The buyer entered into a mortgage of 120,000 euros which will return in, say, 20 years with a fixed interest rate of 2.5%. In installments of 636 euros per month, at the end of the fifth year the buyer has returned about 24,600 euros order amount, but it has also spent 13,500 euros in interest. The fee can be lowered if the payback period is extended, at the cost of paying more interest for a longer life of the loan. This option allows to avoid situations of economic distress in the day. We reccomend limits for a 2,000 euros monthly income, mortgage payment should not exceed 30%; for 6000 income, we can reach 50%. Our creditor bank also requires signing a life insurance and a home before granting the loan. These expenses add, in this case, about 160 euros more each month than the amount of the letter.
After five years, the buyer loses 37,800 euros including taxes, interest and expenses associated with the property, but retains an active 54,600 and you can enjoy or sell at any time the property. We have various property in the range of 150.000, so the example above you can take in consideration. If you need more help we are happy to help you.