Mortgage In House Finaancing-APA

Running head: RENTING IS BETTER THAN BUYING A HOME USING MORTGAGE 1

Renting is Better than Buying a Home Using Mortgage

Name

Institutional Affiliation

RENTING IS BETTER THAN BUYING A HOME USING MORTGAGE 2

Renting is Better than Buying a Home Using Mortgage

Living and working in urban cities compels individuals either to buy or rent a home.

The choice between renting a home and buying one is a key financial decision that people

residing in cities make. For the majority, renting is the initial step towards house ownership

and for others, it has turned into a comfy lifestyle. With the hefty initial investments

associated with buying a house, the majority of young people begin their lives in rental

apartments. Those who are opposed to the idea of renting a house and cannot raise the

upfront budget for buying a home are forced to consider mortgage financing. Both renting

and mortgage are marred by setbacks that limit their effectiveness. In a dynamic market

dominated by social-economic forces that dictate house ownership rates, renting is better than

a mortgage.

Renting ensures flexibility, especially among individuals with temporary jobs and

those who work on contract basis. In the current competitive labor market, permanent jobs

have reduced significantly resulting in an increase in the number of people working on

contracts limited to a period less than six months (Kivedal, 2013). In this perspective, the

majority of people shift from one firm to another in a bid to secure employment. For this

reason, taking a mortgage and buying a permanent home limits an individual from landing

job opportunities. For instance, if an individual takes mortgage financing and gets a better

paying job elsewhere, relocation will present a dilemma. Committing to a mortgage curtails

the freedom of an individual in regard to relocating.

Mortgages are associated with significant financial burdens due to high interest rates.

According to Sovilj and Tkalec (2014), the average mortgage interest rates in most countries

falls between 16 and 20 percent depending on the competition in real estate industry and the

value of property in the specific nation. In this light, taking up a mortgage limits the financial

freedom to invest in other revenue-generating ventures. Stafford, Chen, and Schoeni (2012)

RENTING IS BETTER THAN BUYING A HOME USING MORTGAGE 3

note that some commercial bank advertises over 108 % mortgage financing that demands an

upfront deposit of at least 25 percent. In this perspective, a mortgage leaves an individual

with no finances to make other investments that could yield superior returns within a limited

period. Mortgage option demands a fixed monthly cash outflow for an extensive period that

makes it difficult to accumulate savings resulting in financial crisis.

The eligibility criteria used by the majority of mortgage financiers makes renting a

better option. Income stability is the most important factor that mortgage providers consider

when evaluating the capacity of an individual to services the loan. Some of the people who

qualify for mortgage include directors of reputable companies, salaried individuals, and

owners of established Small and Medium Sized Enterprises (SMEs) (Kivedal, 2013). With

the high rate of unemployment, especially among the youths in middle-income countries,

only a limited percentage of the population has a stable monthly income. In addition, banks

demand an initial deposit as part of the eligibility criteria with a goal of ensuring that those

take out a mortgage will remain committed. In this light, a mortgage is not a viable option for

individuals with unreliable monthly income.

Renting is better than a mortgage in a market dominated by social-economic forces

that govern house ownership rates. Renting guarantees flexibility in regard to relocating

besides limiting financial burdens related to substantial monthly cash outflows. With a

mortgage, it is difficult to accumulate savings with a goal of investing. The eligibility criteria

set for mortgages limit the number of people who can qualify for these loans to salaried

individuals and directors of established companies.

RENTING IS BETTER THAN BUYING A HOME USING MORTGAGE 4

References

Kivedal, B. K. (2013). Testing for rational bubbles in the US housing market. Journal of

Macroeconomics, 38, 369-381.

Sovilj, S., & Tkalec, M. (2014, January). Renting versus Buying: System Dynamics

Approach to Housing. System Dynamics Conference.

Stafford, F., Chen, B., & Schoeni, R. (2012). Mortgage distress and financial liquidity: How

US families are handling savings, mortgages and other debts. PSID Technical Paper

12, 2.

Place new order. It's free, fast and safe

Paper type

Deadline

Page count

550 words

Total price: $ 15.00

Our customers say

Jeff Curtis

USA, Student

"I'm fully satisfied with the essay I've just received. When I read it, I felt like it was exactly what I wanted to say, but couldn’t find the necessary words. Thank you!"

Ian McGregor

UK, Student

"I don’t know what I would do without your assistance! With your help, I met my deadline just in time and the work was very professional. I will be back in several days with another assignment!"

Shannon Williams

Canada, Student

"It was the perfect experience! I enjoyed working with my writer, he delivered my work on time and followed all the guidelines about the referencing and contents."

Mortgage in House Finaancing-APA

Place new order. It's free, fast and safe

Our customers say

Jeff Curtis

Ian McGregor

Shannon Williams