THE dream of buying a piece of land and building your own home, or purchasing a complete house, belongs to many people across the Caribbean. With it comes the responsibility of home ownership and most probably, the largest debt of your lifetime – a mortgage.
A house or an apartment will almost certainly become the largest investment that you will make. As the value of real estate traditionally rises, although not every year, home-ownership is a critical wealth creator. Should you keep and maintain your property for at least a few years, you can potentially earn a substantial amount of capital which can provide great income when you sell your home in the future for a significantly higher value.
By purchasing additional properties, or adding a rental space within your own home, your investment in home-ownership can generate a regular income while you live in it. For some, to rent out an apartment block, is a source of sufficient income to make it your full-time work. It also helps you build up the value of your property so that you can make the most of it when you sell, and live in a mortgage free property of your own.
There have been, however, difficult periods during recessions when property values have reduced considerably. For the individuals who were forced to sell their properties at this time, they may have lost vast fortunes of money. For those who could hold onto the property until values increased, they may not have lost any physical money, but it does help families to understand why they need to look closely at the costs and the benefits of such enormous transactions.
Experts will suggest that you should take a cautious approach to the size of the property and its monthly costs, so that you can retain the home and continue to live in it throughout any recessions in the future.
Some people choose to rent because they believe they have a greater flexibility in being able to move home and match their incomings and outgoings with their accommodation position. To an extent, this is true, but a large mortgage in the beginning will begin to feel much smaller as the years go by and your income increases. As a homeowner you can choose what colour you paint the walls and you won’t have a landlord looking to increase your rent or force you to leave when the situation does not suit you.
Should you have a bad credit record, you may have to continue to look at renting opportunities rather than owning a property until you can prove a long period of good credit, so that a bank or financial establishment will lend you money at a good rate.
When you own your own home, you are responsible for all of the maintenance. You won’t be able to call the landlord to mend a broken kitchen sink.
Some Caribbean countries offer tax deductions for the interest you are paying on your mortgage. For this reason alone, home-ownership can become a generous investment.
Home-ownership puts you in control and helps make your dreams come true, as long as this is balanced with the size of property and mortgage that are relatively easily manageable from your income – and considering any future changes. Where one partner cannot work or several children arrive over a short period of time, can your remaining income cover all of your expenses, including your mortgage and help keep you living in your big dream home?
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Samuel Rosenberg is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to [email protected]