Buying a home cannot be equated with investing in funds or stocks. However, we are not strangers to phrases such as “renting is a waste of money”, which has a clear financial component.

That is why there is one thing that you must be clear about: buying property in Jamaica is an investment. In fact, it is the largest investment you will make in your life and it will condition the rest of your financial options. If you are not sure, just think that what you pay for the mortgage and other household expenses you cannot use for anything else.

Seeing your home as one more investment within a range of options such as mutual funds or stocks, has its advantages. The first is that you will buy your house better and the second that you will make better decisions.

Turn your Home Purchase into an Investment

The first step to making a better financial decision about buying your home is to see it from a different perspective. You need a house to live in, but not necessarily a home you own.

Renting doesn’t have to be a waste of money. In fact, it is just giving a different use to the money you have saved. Buying a house costs a lot of money between what you will have to pay up front and the cost of the mortgage, both for the interest you pay and for the opportunity cost. Here you can see the advantages and disadvantages of buying a house.

Just think that investing in housing for a house of 200,000 euros you will need 56,000 euros to buy. There are many things you could do with that money, buying a house is just one of them. A financial advisor can help you make the best decision.

How Much do you Actually Pay to Buy your House?

Considering your home as an investment for the future will force you to see what it really costs you to buy a house. For starters, buying a home goes beyond what you pay for the home. There are a series of taxes that you must budget and money that you have to save from the start. Most banks will not give you 100% of the price of the apartment, so you will have to contribute the remaining 20% ​​plus about 8% in taxes and expenses.

What Expenses does Sign my Mortgage have?

For a house of 200,000 euros this means that you will have to contribute 56,000 euros of entry. At 25 years and with a 2% mortgage (the Euribor is now negative, but the average since 1999 is 3%) the mortgage payment will be 679 euros. The problem is that with a mortgage you will end up paying 43,551 euros to the bank in interest, to which you must add additional expenses such as linked life insurance, home insurance and current account expenses.

All are products that it is advisable to contract, but the bank will impose its own with an extra cost. Add the IBI and in the end you will pay about 125 euros more per month, in addition to the mortgage payment.

In total, you will pay 281,051 euros for the house. By considering your home as an investment, you will force yourself to do these accounts and you will be able to make better decisions such as mortgaging for fewer years to pay less on the whole purchase, for example. Assuming that your home appreciates 2.5% each year (remember that it can also lose value) and without taking inflation into account, after 25 years your home will be worth 370,000 euros.

Was it a good investment? To find out, you must do a few numbers and see what would have happened if instead of buying a house you had invested those savings and what you could save more per month by not being mortgaged. According to our example, if you pay 500 euros in rent, the monthly savings would be 279 euros and the starting capital would be the 56,000 euros that had to be contributed to be given the mortgage. With a yield of 4% per year (the historical average of the stock market is 8%) after those 25 years, you would have 291,720 euros in your account.

The advantage of considering your home an investment is that you can do the numbers and buy. In addition, it will help you to see the home as an illiquid asset (you cannot sell it whenever you want, the process can take months), compared to the liquidity offered by other investment products with which you can sell at any time.

When you think about your home in financial terms, you will also worry about making sure that you buy a good home. In fact, how to get the house right is one of the most repeated doubts. To solve it, you must analyze the brick as another asset with an estimated profitability. For a house it is possible to use the rental prices. In other words, how much could you rent the house for? For a house like the one in the example with a price of 200,000 euros, a rent in the area estimated at 500 euros, the PER or number of years it would take to pay the price of the house through rent would be 33.33 years. Do this calculation and you can compare one house with another without problems.

If you also get the rental price to be as close as possible to the mortgage payment or above, you can be sure that buying a home will not be a burden. And is that if you want to change your house you can always rent it to pay the loan.

Housing as an Investment for your Retirement

If the home is an investment, it may well be used to plan your retirement. At this point you should always consider the home as an investment, which is different from where you live. To help you understand better, if you bought a four-bedroom house for the family, it is easy that you will not need such a large house when you retire. Rent it and you can have an additional income to the public pension.