Wednesday, August 08, 2007 Osmeña: Innovate shelter program By Antonio V. Osmeña Estatements
WHICH is better, to buy or to rent a home?
Some say it is better to rent than to own.
But from the aesthetic point of view, no doubt, home ownership is more desirable.
But from the financial side, the argument is a little keener. It is sometimes said that home ownership costs more than renting. Actually, one is probably no more expensive than the other.
Unfortunately, there are special groups or in-terests that stand to benefit materially from a community of homeowners.
Their active advertising appears to support the impression that a homeowner can “have his cake and eat it too.”
Yes, home ownership has merits, but it would constitute grave folly to urge it on each and all — although the means are available — unless the principles of home ownership can reasonably be applied.
Critics are very much concerned about government financial institutions that offer housing loans such as Pag-ibig, Social Security Service (SSS) and the Government Service Insurance System (GSIS) since their members are mostly the middle-income earners, some of whom have neither socially nor economically “ripened” to undertake the duties and responsibilities which home ownership necessitates.
Government and private financial institutions should be able to offer a scheme for borrowers — the rent-buy option.
Further consideration should be given to the fact that tenancy not only has its rightful place in our economy but, as a rule, is competitively priced and thus comparable in value per peso to home investment or expenditure.
The renter will find that his rent includes all the costs of maintenance of the property, such as taxes, interest on the mortgage, and depreciation.
To illustrate, a financial institution like Pag-ibig will extend a loan to a properly managed developer that will, in turn, construct condominium units or houses for its (Pag-ibig) members. At the initial phase, Pag-ibig members may be tenants or renters but they will be given the option to buy the unit for a successful home ownership.
A rule for buying which has gained widespread acceptance is the one that requires the price of a home to not exceed two to two-and-half times the buyer’s annual income. The developer should be liable for the loan amortization with Pag-ibig.
In the final analysis, it is the developer who will determine the income of the buyer — more so than the price paid for the home — that governs his ability to carry through the financial obligations which home ownership imposes.
A price in excess of the two to two-and-a-half times income rule is a burdensome strain on a family’s operating budget. A household without children can afford to allocate more for household expenses than families who must provide for health, welfare, and education of their children.
Exceptions, however, should be held closely to the 20 percent maintenance rule which requires that the total outlay for maintaining a home and maintaining the investment in a home should not exceed a maximum of 20 percent of the buyer’s current and reasonably anticipated future income.
In the derivation of the 20 per cent cost of maintenance rule, consideration is given to such items of expense as real estate taxes, assessments, interest on the mortgage indebtedness, amortization of the mortgage principal, fire and windstorm insurance, and cost of utilities. Non-payment of these may cause a lien to be placed on the owner’s property.
A problem of deep concern to most urban prospective home buyers is how best to finance a home and how to derive a mode of payment which will not end in financial grief.
Where to buy a home is also very critical decision and the three principles which should guide a purchaser in the selection of a home are: (1) location, (2) location, and (3) location.
An urban renewal legislation might be necessary to direct financial institutions and the Home Guarantee Corp. to introduce a shelter program for the low income families as renter, and as their economic status improves, allow them the option to own the unit leased to them.
