Hi,
I know this topic has been discussed but I would like some help crunching the numbers.
My husband and I recently moved to Finland with our daughter and we do not know how long we'll stay, which is probably what makes the decision on whether to buy or rent hard.
We both have a permanent job and we make good money for the area (less than in the US for similar jobs, but social welfare is better, so for example we do not need to spend money for health insurance, and daycare is almost 1/10th of what it would be in the US). We just have not fallen in love with the place - it is just a rational decision that makes us think that having a kid it makes sense to live here, but we might move if we got a good opportunity somewhere else.
We currently live in an apartment and we pay 1250€ in rent, plus 60€ for water, 20€ for parking, 10€ for internet. Heating is included, so we other expenses are electricity for lights and cooking, and 250€ per year for renter's insurance.
The apartment we live in is OK, and the neighborhood is convenient, but we do not love it and probably would not want to live year for 10+ years. We would like to move from an apartment building to a semi-detached house or townhouse (not really considering single family home as expenses would be much higher).
These are the numbers for buying:
- mortgage rates are around 3.8%-4% with fixed rate. There is also the option of Euribor+margin that right now would be around 2.2%-2.3%, and is updated every 12 months. There is the possibility to add a cap to the variable rate, so for example paying about 1.3% extra interest rate (4.5% total now), the maximum interest rate would be 4.8% for 10 year. It works as an insurance. It could be lower if the euribor decreases, but it would never be higher
- downpayment: if it is 20% to 30% (depending on the bank) there is no need to purchase additional collateral. If it is lower, the cost of additional collateral is 0.9% per year. For example if I needed 50k I would pay 450€ per year, and that amount would decrease each year as the principle that I pay counts as collateral
- buying taxes: as first time buyer younger than 40 years old there are no transfer taxes
- property taxes: most of the time the apartments/houses are part of a housing association. What you buy is shares into the housing association that correspond to a specific house/apartment. Property taxes are included in the monthly payment
- housing association: for places we are looking at, the monthly cost is 300€-500€. Often this includes heating, property taxes, general maintenance of common areas. For older places it tends to be on the higher side, and sometimes it includes some buffer to handle small repairs. For bigger maintenance usually the housing association takes out a loan that is divided among the shareholders, with the option to repay it monthly or all at once
- other expenses: from a quick search, it seems that homeowner insurance would cost about the same as renter's insurance. Water and parking usually cost about as much as we pay now.
- cost of selling the house: according to google, realtor charges 4%-7%
It is required by law to give a detailed report on maintenance that has been done, and the housing association usually also provides plans for the next 5 years. Major renovations of water and sewer usually happen every 50 years, so now they are doing them for houses built in the 70's, and will start with houses from the 80s soon.
For buying, we are considering:
- the area where we currently live in. It is convenient for our daughter daycare (we really do not want to change daycare) and also allows us to use public transportation for commute easily. Commute by car is 10km each way. Older houses the size we are looking at (900 to 1200 sqft) in this area cost about 350k, and were for the most part in built in the 80s. The disadvantage is that pipe renovation would be due in a few years and I would think that it might make it harder to sell the place if we decide to move before it happens (and we would have to move out for a few weeks if we still live there when it happens).
Newer places are significantly more expensive, 600k or more. Sometimes with newer places there is the option to not own the land and save 150k to 200k, but then you have to pay rent that can be 200€ to 700€ per month. Usually it is possible to buy the land later, but the price goes up with the cost of living index (the city usually owns the land).
- an area that is further away from daycare, work, and the city center. Daycare would be in the middle and commute by car would only be 10 minutes longer than commute by car from where we live now. It is a growing area and they are building a lot there right now. I imagine that prices will go up as more services and public transportation increase. A new house in this area is about 500k (or 400k + 100k for the land). There will be a metro station opening soon about 2.5km away, but the connection with buses is not great and with a 3 year old in winter when it is really cold and dark might get a bit unpleasant. Realistically we would be using the car a lot more. Total commute would be about 17km each day (vs 10 currently).
Other information: the expectation is that about 60k more people will move to this city in the next 30 years.
The city is Espoo, in Finland. The area we currently live in is Olari, and the other area we are considering is Tillinmäki.
I think I need somebody to help me look at it objectively. Thank you for helping!
