Mortgage or rent? This is a question that many young people ask themselves. The answer is not exactly simple. It always depends not only on your current options, but also on your preferences and plans for the future. What are the advantages and disadvantages of both options? And what about paying off your own home in the form of rent?
Sooner or later, each of us reaches the stage where we are dealing with our own housing. If you are not lucky enough to have a loved one willing to gift you a property, there are two basic options – renting or buying a property. Few people can afford to buy a property out of their own pocket, which is why this option often involves taking out a mortgage.
The amount of monthly rent and mortgage payments can be quite comparable. In each case, however, you get something a little different. Whereas with a mortgage you buy your own home and repay the loan you have taken out to buy it, with a lease you get to use the property without owning it. There are undoubtedly pros and cons to each option. Let’s take a closer look at them.
Wondering how to buy a mortgage-financed home? Then you must not miss our next article, in which you will learn the conditions for obtaining a mortgage.
A mortgage is a financial commitment that you will face for many years, but it also gives you the luxury of owning your own home. However, you should take into account the conditions you need to meet in order to obtain a mortgage. Be prepared to have to provide proof of your income. Depending on how much you have, the bank will calculate the maximum amount it can lend you.
To get a mortgage loan, you will still need to save a few(hundred) thousand to start with. It is true that when taking out a mortgage, the applicant must pay part of the purchase price from their own funds. Previously, it was necessary to have saved at least 10% of the value of the mortgaged property. However, the CNB has decided to reduce the LTV (Loan to Value) to 80% and you now need one fifth of the final amount. To buy an apartment worth CZK 8 million, you will need to have at least CZK 1,600,000 saved.
The LTV for young people under 36 is still 90%. However, the important thing is that it must always be their own home.
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Whilerenting a property won’t tie you down financially for years or require you to prove your income, it won’t give you any security. You don’t own the property, you just pay for its use every month. In addition, the landlord usually has the right to increase the rent after a certain period of time, to carry out inspections of the apartment, or to terminate the lease if he needs the apartment for himself or a loved one, or if it is agreed in the lease.
In general, renting often becomes a temporary solution and most people sooner or later proceed to a mortgage loan and purchase their own home. However, there are also many families who live in rented accommodation for life. This is often due to lack of finances or a poorer payment history that does not allow them to take out a mortgage. However, the motives may be different. For example, some people prefer not owning anything, not having to take care of the property and in case of problems simply contacting the owner of the flat or house who will take care of any defects.
Nowadays, there is a growing preference for the freedom that renting offers. It enables people to live in an otherwise inaccessible neighbourhood, for example, and to change locations according to their current preferences.
How to avoid the risks associated with termination of the lease? We have compiled the situations we often encounter in practice into an article.
An interesting solution that combines some of the advantages of renting is to sell an apartment or house on hire purchase. This is an ideal solution for young couples who, due to their income, cannot yet afford a mortgage but would like to live in their own home. Or for those who, for example, due to foreclosures or unstable and unprovable income , cannot obtain a mortgage loan at the time they are dealing with housing.
There are several portals and services that offer flats or houses to buy as rentals. Just choose any property that is currently for sale and apply for this mode of financing on the portal of your choice. This way you can finance not only the purchase of an older property but also the construction of a new one.
The principle is to split the price of the property into monthly instalments. There is no need to apply for a mortgage loan and you just pay a pre-agreed amount each month while you use the apartment or house normally. The monthly repayments are guaranteed, so you don’t have to worry about the amount increasing in any way. You can choose the amount and therefore the repayment period. Some providers have a booking fee, but there are also services where there are no fees and you don’t need to have a lot of money saved up when you buy.
If you choose to pay off your property early when renting, you can do so without penalties or fees. This makes it easy to switch your rental payments to conventional mortgage financing at any time. Simply apply for a mortgage when your situation allows, pay off the balance (outstanding balance) with the mortgage and continue to make standard payments to the bank. However, it is a good idea to have the terms checked by a solicitor so that there are no surprises in the contract.
In foreign countries, there is a variant where a person buys only 70% of an apartment from a developer . The price is thus more favourable and the rest is then gradually paid off or bought later and just rented for the time being.
Whichever form of housing you choose, you need to take into account a thorough contractual treatment of each step. Don’t risk significant financial loss, or even your new property. We have extensive experience in renting apartments and houses, as well as selling them, and we will be happy to help you set everything up so that your new home brings you nothing but joy.
Deciding between a mortgage and renting depends on financial means and life preferences. A mortgage is a long-term commitment, but provides the security of home ownership. To get a mortgage, you need to provide proof of income and have saved a portion of the purchase price – usually 20%, but 10% is enough for young people under 36. Renting offers greater flexibility, does not require initial savings or commitment, but brings uncertainty in the form of possible rent increases or termination.
A compromise is to pay off the property as a lease, where monthly payments are gradually converted into ownership. Whichever option one chooses, careful contractual treatment is key to protect against financial risks.
We provide a complete package of legal services related to real estate sales and purchases, including reservation contracts and escrow services. We will also help you with all tax and land registry issues. Our work is fast and accurate, ensuring a worry-free transaction. You’re also welcome to pay after services are provided.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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