What's better – saving money for an apartment or getting a mortgage? Saving money on your own is the usual option, but not necessarily the cheapest. In many European countries you couldn't get a mortgage just ten years ago. In spite of all the positive aspects of the saving money option, all of your savings can be insufficient because of the constant rise in housing prices. And the rate of increase isn't slight – 30% has been the annual average over the last seven years. Choosing to save money, you can spend the best years of your life saying no to buying a variety of things for the sake of illusory dreams of buying an apartment, while living in a rented apartment or house that you will never own.
In Europe, storage is widely used to cope with the housing problem (HBC and other forms). This method is also available in our country. On the plus side, the nominal value of this option is low. But here are some minuses:
1. The amount of money needed means you will have to save for a long time;
2. You do not immediately become the owner of the property, while with a mortgage you become the owner at once;
3. There is considerable risk that the cooperative in which you have invested your hard earned money will go bankrupt.
So let’s consider the option of a mortgage. This option is the most optimal solution for the housing problems in the world. These are the positives of a mortgage:
1. Economic gains – the rise of prices for real estate is much greater than the increase in price of an apartment funded by a mortgage loan;
2. The bank risks its money that it granted to you, which means you do not risk your own money;
3. Immediate satisfaction – you become the owner of the property immediately, and not in a few years.
Now let’s determine how much more expensive housing will be if you purchase it with a mortgage loan. To get an accurate answer we should factor in all the parameters, including the interest rate on the loan, duration of the loan, tax rate, amount of the initial payment, and so on.
Here are some examples:
Example 1: the loan term is 10 years, the initial payment is 25% of the sum, the interest rate is 10.5% per annum, the loan is a repaid loan.
In ten years, if we take into consideration the cost of income tax paid on the interest and credit interest, the housing price is projected to rise by 40%, or about 4% per year. As the rate of increase in prices of houses and apartments in the city is about 30%, the benefit of the mortgage is obvious.
Example 2: the loan term is 10 years, 25% of the sum is the initial payment, 10.5% per annum is the interest rate, the loan is paid back for the first five years, then early full repayment takes place.
In five years, if we tale into consideration the cost of income tax paid by the interest and credit interest, the housing price will rise by 29%, or about 6% per year. The rate of increase in prices of real property in the city is about 30%, so the benefit of the mortgage is evident.
The third example: the loan term is 15 years, 25% of the sum is the initial payment, 10.5% per annum is the interest rate, the loan is paid back on schedule for the first seven years, then early full repayment takes place.
In seven years, if we take into consideration the cost of income tax paid by the interest and credit interest, the housing price will rise by 28%, or about 5% per year. Rate of increase in prices of real property in the city is about 30%, and the benefit of the mortgage is again evident.
In Europe, storage is widely used to cope with the housing problem (HBC and other forms). This method is also available in our country. On the plus side, the nominal value of this option is low. But here are some minuses:
1. The amount of money needed means you will have to save for a long time;
2. You do not immediately become the owner of the property, while with a mortgage you become the owner at once;
3. There is considerable risk that the cooperative in which you have invested your hard earned money will go bankrupt.
So let’s consider the option of a mortgage. This option is the most optimal solution for the housing problems in the world. These are the positives of a mortgage:
1. Economic gains – the rise of prices for real estate is much greater than the increase in price of an apartment funded by a mortgage loan;
2. The bank risks its money that it granted to you, which means you do not risk your own money;
3. Immediate satisfaction – you become the owner of the property immediately, and not in a few years.
Now let’s determine how much more expensive housing will be if you purchase it with a mortgage loan. To get an accurate answer we should factor in all the parameters, including the interest rate on the loan, duration of the loan, tax rate, amount of the initial payment, and so on.
Here are some examples:
Example 1: the loan term is 10 years, the initial payment is 25% of the sum, the interest rate is 10.5% per annum, the loan is a repaid loan.
In ten years, if we take into consideration the cost of income tax paid on the interest and credit interest, the housing price is projected to rise by 40%, or about 4% per year. As the rate of increase in prices of houses and apartments in the city is about 30%, the benefit of the mortgage is obvious.
Example 2: the loan term is 10 years, 25% of the sum is the initial payment, 10.5% per annum is the interest rate, the loan is paid back for the first five years, then early full repayment takes place.
In five years, if we tale into consideration the cost of income tax paid by the interest and credit interest, the housing price will rise by 29%, or about 6% per year. The rate of increase in prices of real property in the city is about 30%, so the benefit of the mortgage is evident.
The third example: the loan term is 15 years, 25% of the sum is the initial payment, 10.5% per annum is the interest rate, the loan is paid back on schedule for the first seven years, then early full repayment takes place.
In seven years, if we take into consideration the cost of income tax paid by the interest and credit interest, the housing price will rise by 28%, or about 5% per year. Rate of increase in prices of real property in the city is about 30%, and the benefit of the mortgage is again evident.
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