Save or borrow?
Taking into account the conditions of the mortgage loans that are offered today, and the value of one-bedroom apartment in Buenos Aires, a person would have to borrow from a bank for 15 years, paying monthly U.S. $ 1,000 access to home ownership. Even if it could save u $ s1.800 pay off the debt in just 30 months. What for you? Mario Gomez, the real estate market expert and in charge of the course “The real estate and personal finance” Global Investor campus, provides the answer.
This week, the newspaper La Nacion published an article titled: “You have to earn $ 11,000 to pay a mortgage.” The calculation arises to estimate the income share ratio down the banks (30%), for someone who goes into debt for 70% of a department of u $ s 78,000 (60 m2 at the average prices that publishes Real Estate Report) . In short, those who take a credit of $ s54.000 have to pay for 15 years some U.S. $ 1,000 to pay off the loan, interest, insurance and taxes, using the French system of depreciation.
However, this family group earns revenue by about $ s3.000, if over 30 months save 60% of their income (u $ s 1,800 per month), agree to the $ s 54,000. It is true that would be adjusted for two and a half years and live with 40% of household income, but soon could put together as in 15 years of lending commitments.
Some reasons why it is better to save than to borrow:
1 .- The debt makes despise money
When you get something without the sweat from his brow values makes it less (which is why many people who win the lottery squander money quickly).
2 .- The debt is a financial solution in the short term physical and psychological consequences of long-term
The consequences are material debt (interest) and psychological (worry, feelings of helplessness if you can not pay, insecurity in case unexpected expenses occur.)
3 .- The debt becomes a habit
Debt can even become a lifestyle whereby people believe that living in debt is normal. Many make an unwise use of credit cards to maintain their lifestyle.
4 .- The debt inevitably leads to financial stress
Simple and clear: Debt is stressful! You worry, you are depressed and demotivated you because what you earn, his, has long been another person (the bank).
5 .- The debt makes it difficult to save
What is the main reason for people not saving? Debts. If unforeseen: that you will pay an unexpected expense? The answer is “with a new debt.”
Debts still must find a way to save, in the same way that those who are trained in survival still hungry try to eat as little as possible so that the food they last.
6 .- The debt limits and conditions you mentally
Do you consider yourself able to buy a car, start a business or buy a home for cash? “Yes, but here a few years.” But many people can not think about getting this without debt.
Life is easier to bear to save and then buy for cash, at years end up paying debt and capital, the interests of capital and other costs.
7 .- The debts put you at a disadvantage
That there is a debt by the debtor makes the lender feel that they have some control or authority over him, and in some situations makes the lender feel right to control in some way to his debtor.
Obviously the saver because you can is one lucky, you get a more quality of life and sense of security. But savings alone is not enough. The proper functioning of the economy and most importantly, job creation and maintenance of existing positions, require savings become investments. And real estate investment is an appropriate channel for many operators.
