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A Home: To Own or to Rent Leave a comment

To Own Or To Rent…

Making the decision to go from renting where you live to owning your dream home is the biggest, most adult decision one can possibly make! If you own your home/house in Rwanda, I salute you. The decision to construct or buy a house in Rwanda is not for the faint hearted! You are the true adults.

When I was younger, I made a few decisions myself; principles that have guided the way I live my life. “Who cares about your personal principles in a home buying versus renting article? You may ask. Well, this question of whether to own or rent a house happens to touch the very heart of two decisions I made while very young. One, I will not take a bank loan; two I am never spending nights in bars. I have seen a couple of examples in my life to know I have some truth in sticking with these principles.

Now when I got to university, I made some friends who enjoyed a good night out at the bar. You know the saying, show me your friends and I show you who you are. Well, let’s just say, I ended up staying in bars late myself a few times. I now enjoy hanging out with friends at bars, but it is mostly because of the conversations. The most interesting conversations, I truly believe, happen in bars or in other social gatherings after a couple of beers and drinks…. Topics range from relationships to politics to finances to accomplishments and everything in between. I have experienced both extremes; some of the dumbest ideas as well as some of the most brilliant ideas in the wee hours of the night having drinks with friends and other random people.   

 Recently during one of these socializing events, we got into the topic of buying/constructing a house versus renting a house here in Rwanda. Thankfully, we had a good mix of both sexes and a good spread in terms of the age bracket. As many would suspect, the majority were on the side of buying/constructing a home rather than renting one. This is the dream! Many will stake their entire lifestyle just to “own a home”. So I went home that night feeling like the next best move is to go get me a bank loan to buy my dream home! Consequently, I decided to do some research on my own and compare the pros and cons of buying/ constructing a house versus renting one.

RENTING A HOUSE IN RWANDA

As I mentioned above, owning your home in Rwanda (and in most places around the world) is the dream… Mostly because most of us look at these cons of renting (rightly so for some), stated below;

Rent Money Is Dead Money

This is probably the biggest and most heart wrenching reason most want to move from renting to owning their home. For many, rent money is dead money! It goes to enrich someone else or pay off his or her mortgage. The thought of paying off someone’s mortgage instead of paying off your own just drives many crazy! Rightly so, if I may add. There is zero return on investment in paying monthly rent.

At the Mercy of the Landlord

The insecurity that comes with the possibility of getting kicked out of a house at any time and for any reason the property owner sees fit frightens many folk. The property owner can decide to give you a months’ notice if they are generous or less for the not so generous and not give you a reason for making your leave. In addition, the property owner may decide to increase the rent at will. For those who rent, you know what I am talking about, the thoughts that run through your head when you get a call from the property owner.

A Threat to Your Lifestyle

For those looking to settle, build a family or career in a given area, renting pauses a threat to the lifestyle you are trying to build. Not having a permanent place to settle will inevitably disrupt your lifestyle, delay some of your decisions, and alter your goals and much more. You end up choosing a lifestyle you do not want just because you are renting.

A Threat to Your Privacy

Every year, my property owner does maintenance works on the house I live in. I am forced to have people in my house for two weeks, going through the rooms and other stuff in the name of maintenance and repairs. It pains me profoundly when this happens but I am forced to give up my privacy because I don’t own that house, such BS!

Play by the Landlord’s Rules

There is only so much you can do with the space you are renting. You have to use the space as it is provided to you. You cannot change the structure, walls, windows etc. to match your taste. Some property owners will dictate whether you can repaint, own pets, have children, build a car shade, mount your TV or cut down that tree in the compound that is a nuisance in littering and blocks the view. This limits your lifestyle preferences.

Nevertheless, that said, renting has its benefits.

Adapting to Changes in Life

The ability to move from a place or area at will is one of the biggest advantages to renting. Life is dynamic and changes very often. Renting provides the ability to change with the changes in your life. Changes may vary from life style changes for example if you need to move to a more affluent neighbourhood because of a career advancement or boost. Alternatively, it can also be that the neighbourhood is prone to theft and break-ins and you want to move to a safer neighbourhood.

Low Upfront and Ongoing Costs

The cost of renting can be much less than a monthly mortgage payment. Banks in Rwanda require an upfront deposit on a mortgage loan between 20% and 30% of the amount you need to get the home loan. On top of that, depending on the bank, you pay an annual interest rate of between 11% (the cheapest so far) to up to 17% 0r 18%! Then there are the ongoing maintenance and repair costs, property tax, security, garbage collection and others depending on your neighbourhood. It makes renting much cheaper and less stressful.

For more information on mortgage/home loans, write to Urugo at info@urugo.store or follow these links below;
https://www.imbank.com/rwanda/loans/home-loans/
https://bpr.rw/products/homeloan
https://www.cogebanque.co.rw/diaspora/mortgage-loans-2/
https://www.bk.rw/personal/loans/house-purchase

Choose Where You Want to Live

Renting allows you to live in an area of your choice to suit your situation or preferences. You may choose to live in an area close to your work place, or your gym. Some people prefer to live close to their church, or the market or their child’ school. Renting also allows you to live in a place you may not be able to afford to buy/construct, hence allowing you to dictate to an extent the lifestyle you want.

Vision City in Gacuriro; an affluent neighborhood in Kigali

Constructing or Buying to Own a Home

As I mentioned in the previous paragraphs, owning your home is the dream for most of us on this planet for obvious reasons including the following:

Primarily, the need to have a place to call a home of our very own drives us to want to the ultimate dream. If you have been renting for as long as I have, you know the pains of having to move every now and again, the stress and loss that comes with the whole exercise is a whole topic in itself! So for many, the peace of mind that comes with owning your home is it.

To build on that, the sense of pride and accomplishment that comes with owning your own place is a goal most of us want to achieve in our lifetimes. Many first time homeowners take pride in, and feel personally accomplished after purchasing their first home or completion of construction of their house.

The peace of mind that comes with knowing you live in your own house is like no other. Knowing that regardless of any situation, you and your family will have a roof over your head gives one a true sense of peace and security.

All of us are uncertain about what the future holds. We do not know what is going to happen tomorrow, or a month, year, 5 years from today. For those with children, thinking about the sustainability of their children should anything happen to them is a constant monkey-on-the-back. Having your own home ensures that your children have some inheritance in place should anything happen to you.

For others, owning a house is a tangible asset that they can use as a stepping-stone to more prosperity. Banks and other financial institutions consider a house as a secure collateral upon which one can borrow. Many use their homes as collateral to borrow funds to build businesses, buy additional property, and pay for their education or the education of their children and many other undertakings.

However, even with all the above-mentioned pros and many unmentioned ones, buying or construction of a house has its setbacks. This kind of undertaking is not for everyone. It requires heavy front-end investment, which most cannot afford, regardless of whether you are going with the financing from financial institutions or self-financing. As mentioned in the above sections, banks in Rwanda will require an upfront deposit of between 20% and 30% of the entire home construction project. This does not include the cost of the land itself; save for one or two financial institutions that offer this product on the Rwandan market. More than a third of new the homeowners I have talked to say they went over budget when either buying or constructing their new house. There are hidden costs that are usually not accounted for during the budgeting stage.

On completion of the project, there will be the ongoing cost to maintain and repair the house, from making small fixtures in the plumbing and electrical to more expensive repairs like fixing walls affected by humidity, repainting, fixing leaky roofs, water damages to mention a few. These continuous unplanned fixes have a significant impact on the family budget when looked at universally. 

Inflexibility will inevitably come with living in your own home. This can make it hard to make changes in your lifestyle for example making a major career choice, relocating to another neighbourhood with proximity to your work place, basic infrastructure such as schools, hospitals, markets, entertainment centres etc. It may also hinder a change in your lifestyle as you go through changes in your life for example a growing family.

For many first time homeowners, especially those that take mortgage financing from financial institutions, take a hit on their savings and ability to invest when paying off the monthly mortgage deposits. More than 80% of homeowners paying mortgages say, they have minimal to no savings and indicate that they have a high debt burden. More than a third of homeowners paying a mortgage end up defaulting on their monthly payments, which leads to financial institutions repossessing their homes.   

Before You Choose, Do the Maths

Get as much information as possible before taking the leap!

For all the above reasons and many more, making the decision on whether to rent a house or own a house in Rwanda, the best thing to do is do loads and loads of homework. Do the maths, make sure you understand what your needs/wants are, and how either owning or renting addresses your needs. Ask that friend who has constructed/bought their home and find out how they did it. Talk to your bank and understand their products. Or talk to us at Urugo (info@urugo.store), we will be happy to run you through the options, maths and much more. For those of us who do not have the muscle to self-finance an undertaking like this one but are seriously considering owning a home, I personally feel like it is more practical to talk to your bank first to understand their mortgage or home loan products. Once you understand how it all works, try putting away the amount you may need to service your mortgage for at least 6 months. This will help you understand how it affects your lifestyle, and provide you individual insight on the effects on such a decision on your life, especially in the long term. Another upside of this is some of this saving may contribute to your down payment should you decide getting that getting a mortgage is the route for you. Understanding your cash flow will help you plan better for the life changing decision that this one is.

My Thought? Neither Is Right or Wrong

My personal conclusion is that neither owning nor renting your house is wrong or right. It all boils down to our individual goals, dreams and aspirations, choices and lifestyles. For those who, after putting away your anticipated monthly mortgage payments for 6 months to a year feel like they can do it, go right ahead. If you are in a place temporarily, or are in a situation that moves you constantly, or you feel like the upfront costs, interest costs, taxes and other cost that come with owning your own place are just too steep for you at the moment, then renting  maybe the smarter option.

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