Housing is a basic necessity for everyone, so looking for a new apartment or a private home requires a lot of attention. Nowadays, you can rent a long-term home, buy your own home, or even build your dream home from scratch. Each option has its own advantages and disadvantages, but mortgage credit for the purchase or construction of a property is gradually becoming more sought after. Why has the demand for mortgage loans increased in 2018? Find out in our new article!
Renting a home: a simple but unstable solution
Nowadays, independent living and separation from the parent’s nest almost always begin with moving to a rented apartment or at least a room. Renting a home is a good option during your study years, and many people continue to rent well after graduating and starting work. Renting has several advantages:
- the apartment can be found relatively quickly, the supply in different cities and districts is large enough;
- a flat in a standard-type home can be rented at a low price, though in this case you have to put up with major renovations and lower housing quality (thin walls, untidy staircase, etc.).
Tenants also face other minuses, such as:
- lack of stability. In Latvia, only in 2018, the tenancy law protects tenants’ rights, but in any case the tenant cannot feel 100% safe with the roof over his head – the landlord retains the right to raise the rent or demand the tenants to move out within the legal term;
- limited supply in certain segments. The real estate market in Latvia is distorted and potential tenants have access to either very expensive or inexpensive but sometimes inferior quality rental properties. Medium-priced housing is usually offered for purchase rather than rent.
The average rent for a good home in Riga is around 300 to 500 USD per month. In turn, a home loan allows you to buy your own apartment and pay less each month. Find out more about the benefits of buying a home in the following article!
Buying a home: a good solution in the long run
Buying your own home can be more profitable in the long run as the cost of renting today is as high as your monthly mortgage payments. If you want to settle down in a specific place and are confident that your plans will not change in the future, a home loan can be a good solution. To get a loan, you need to choose a creditor, a property, and save money for your down payment.
State aid for the purchase of a dwelling
For potential home buyers who have a regular income but no savings on their down payment, they have access to a housing loan with a state guarantee provided by ALTUM, a public financial institution. Home loan for young families with children up to 23 years is granted with a guarantee that depends on the number of children in the family:
- one child – 10% of the loan amount (up to USD 10,000);
- two children – 15% of the loan amount (maximum USD 15,000);
- three children – 20% of the loan amount (up to USD 10,000).
Support for young families is available for up to 10 years.
Since 2018, state-guaranteed housing loans are also available to young professionals. The terms of the guarantee are as follows:
- the guarantee is available to persons under the age of 35 with a higher or secondary vocational education;
- up to 20% of the guarantee for an amount of up to USD 50,000;
- warranty up to 10 years.
Detailed information on the use of the State guarantee is available on the Fera website, as well as at banks and non-bank lenders. Each situation is individual, so only a loan specialist will be able to calculate the cost of the mortgage in your case.
How to make money with your home?
Another reason for buying a home today, rather than renting it, is the ability to dispose of your property more freely. Homeowners know that the monthly rent must be paid on a regular basis, whether or not this month’s apartment was used. This leads to higher travel expenses, as the tenant has to bear not only the cost of the trip but also the rent. Most homeowners do not allow subletting, so the total cost to the tenant in some situations can be very high.
Owners of apartments and private houses are in a completely different situation. The owner can also afford to go for a longer trip by renting out his home and earning an additional source of income for one or even months.
But maybe you are not interested in an apartment, but in a private house? Then keep reading and learn how to make the mistake of buying a home!
Building your own home – fulfilling your dreams or wasting effort?
A private home can be the ideal home for a family, a senior couple, and anyone who likes space and wants to feel like a real landlord. If this is your dream, you have two options – buy a ready-made house or build it yourself.
Here’s what you need to know to make a wise choice:
- building a home by itself is always more expensive. Prolonged construction, inflation, the need to borrow, make it impossible to fit into the initial estimate in 99% of cases. On the other hand, by building independently, you have complete control over the quality of work and raw materials and, ultimately, create a home that fully meets your expectations;
- Buying a home is faster and more profitable, and land is almost always included in the price of the house, but the buyer has to accept the relatively low supply of private homes in the mid-range segment. Over time, the house may become defective and may require rebuilding.
The middle ground between these options is to look at a house with a reputable developer or buy only land and build a Scandinavian modular house on it.
In any case, take into account that buying a home and land requires significant spending, so getting a home loan can be problematic. At the end of this article, let’s talk about how to evaluate your chances of getting a mortgage!
Who has a home loan on favorable terms?
An advantageous mortgage is a notional concept because every loan involves additional spending, and a home loan is one of the largest loans to individuals. However, the total cost of a loan can be reduced if the applicant meets the following requirements:
- positive credit history. Both banks and non-bank lenders are more willing to lend to people who have already used credit services and have proven their solvency and responsible attitude to debt;
- high solvency. Low-income individuals cannot obtain a home loan, but the higher the income, the easier it is to plan a loan repayment. A large overpayment for a loan is due to interest, so a slightly higher monthly payment means a shorter repayment period and a lower total cost;
- stable life situation. Mortgage credit is provided to people with regular incomes, so the borrower’s workflow plays an important role in assessing a loan application – if a person changes their job and position every year, it can be a sign of an unstable lifestyle and the loan may be refused.
Nowadays, home equity loans are relatively easy for individuals with adequate credit and a positive credit history , and state aid programs help to buy property for certain groups of the population. Before going to a bank representative, check out the offerings of non-bank lenders – maybe you will find the best loan on the Joad family platform?