I have a very simple question - rent or buy a house in a poor country when you have a stable income?
There are many articles on this topic but I cannot find the right solution for my specific case as most of the articles are targeted for countries where the financial situation is different. I'll present you the facts first:
- I live in a poor country where the minimum salary is ~ 200 EUR per month
- The average salary in the country is ~ 400 EUR per month
- My salary is ~ 2000 EUR per month (I work for a foreign company)
- A nice place to live costs ~ 60 000 EUR
- I have already in my bank account ~ 30 000 EUR
- My rent is ~250 EUR (I live in a luxury building)
- The interests rate for deposits in our banks are ~1% per year
- The interests rate for loans in our banks are ~6% per year
- Currently I can save ~500 EUR per month after rent, food, taxes, etc.
- I am on a very stable job position
- I don't have any kids yet
Here are my thoughts:
If I get a loan for the remaining 30 000 EUR I will have a place to live and I can pay 750 EUR per month (500 + 250 as I won't pay any rent). At this rate I will be able to pay the loan in less than 4 years. I will have to pay ~ 4 000 EUR in interests for those ~ 4 years.
If I try to collect the remaining 30 000 EUR cash I will have to wait ~ 60 months. Meanwhile I will have to pay the rent for those 5 years and at the end I will have the same house but 1 year (and even more) later and meanwhile I will have to pay ~ 15 000 EUR for rent (60 * 250). In this time I will have my current 30 000 EUR in a bank with a 1% return rate or ~ 300 EUR per year when I start and ~ 600 EUR per year at the end of the period. This is an average 450 EUR per year for 5 years so I will actually have lost 15 000 for rent - 2 250 = 12 750 EUR for those 5 years.
Does that mean that buying the house will save me 8 750 EUR? Is there something that I'm missing?
P.S: I understand that in general this is not the case - in most cases people around me get a loan for 15-30 years and there the whole picture is very different.