Is renting or buying better is a Costa Rica Real Estate FAQ that you can grow old discussing. The answer to the question if renting or buying is better is not the same for everyone. This depends on a large number of circumstances and options that differ from person to person. It depends on your up bring, your lifestyle, your income and your goals in life.
Since our weekly blogs are being read by both Costa Ricans as well as foreigners, I’d like to give you the facts. Then, you can decide if renting or buying is better for you.
For a resident or citizen
Mortgage
If you are a resident or Citizen of Costa Rica, you can apply for a mortgage. Bank mortgages in Costa Rica run around 9.5% – 30 years fixed in US dollars (*May 2018) with a 20 – 30% LTV (Loan to Value).
Purchase vs paying rent
A $150,000 condo pays around $850/month rent. This will be a total rent in 30 years of $306,000, not taking into account any raises in rent.
You can be the legal owner of the same $150,000 with an 80% mortgage at 9.5% at 30 years which will cost you $363,249.02 + $30,000 = $393,249.02. For $1,009/month (after the $30,000 earnest money), the condo will by yours.
Add to the $1,009 another $250/month for property tax, insurance, and HOA fees.
For a non-resident
If you’re not a legal resident, I suggest you ask yourself the question if renting or buying is better. You’ll have a lifetime of having to pay rent ahead of you and you will save a lot of money by buying.
Mortgage
As a non-resident, you cannot apply for a bank mortgage. The only way to purchase is by buying cash or with owner financing. Creative financing, like using your retirement funds such as an IRA or 401K is possible but restrictions apply.
Other options
Paying cash
Do you have enough cash to purchase a house or condo? An option other than buying would be to rent and invest your savings well. In Costa Rica, a CD pays around 2% annually. $150,000 will supply $3,000 toward your rent. You will need to find an investment that will pay you 6.8% annually to cover your rent without eating up the principal.
Unsecured personal loan
If you’re a US national with a credit score of 640 or higher, with a verifiable income, there is now a solution: an unsecured personal loan. Read more about this option by clicking on the banner below.
Feeling home
While homeowners tend to upgrade their property constantly, tenants depend on a landlord for this. A landlord might not give a tenant the same possibilities of turning a condo into a home by adding personal touches to the home.
Location
Renting will give a tenant more flexibility in moving to a better location when getting a new job elsewhere. Children might need to travel longer to go to a specific school
Moving elsewhere
If you plan to move elsewhere, the answer to renting or buying will change the picture totally.
Renting or buying?
When renting, all rents paid during the time you rented, are gone.
When buying, there is a chance that your property will appreciate. The more land you own, the bigger the chance is for appreciation. A condo in Costa Rica will likely depreciate, usually at 2% a year. This depends a lot on the location, the quality, and maintenance of the building as well as the unit. By selling with a profit or with some loss, you will always recover most or all of your investment.
Furthermore, it is a fact that renting or buying should be an easy decision based on the numbers mentioned above if you need a mortgage. But your children will not inherit anything from you except if you’ve been able to save elsewhere.
As you see, the #1 MLS in Costa Rica tries to give you all the necessary tools so you can make better decisions. Therefore, if you’d like to receive more information or a showing appointment, contact us now.
