Depending on the company you work for, there is a risk of losing housing allowances when you own a home.
Risks of Homeownership
Risks of Mortgage Repayment and Interest Rate Fluctuation
There is a risk of being unable to repay the mortgage. Examples include:
Getting laid off by the company
Being unable to work for an extended period due to illness
Loss of income
Divorce resulting in the need to rent two homes
You are required to pay the mortgage, but you also need a place to live, leading to a dilemma.
With renting, you can downsize and adjust the size of the home according to each family’s needs.
While the borrowing limit is often stated as eight times annual income, this is the amount banks can lend, not necessarily what the borrower can comfortably repay. Consequently, there is a risk of eventually being unable to repay.
There is a certain number of people who end up declaring bankruptcy due to being unable to pay their mortgages.
This uncertainty poses a risk because one doesn’t know what will happen to them.
Another risk is the fluctuation of interest rates.
While currently, interest rates are low, it’s uncertain what will happen after the zero-interest-rate policy is lifted. A rise in interest rates could make payments even more difficult.
5. Vulnerability to Disasters (Disaster Risk)
Various disasters such as earthquakes and fires exist. For more details, refer to the earthquake insurance series from the Earthquake Insurance Association:
[Links to the series provided.]
Owning a home means accepting the risks associated with ownership, including:
Occurrence of disasters
Fluctuations in market value
Changes in interest rates
When risks materialize, a home can quickly turn into a liability.
Comparing a similar rental property and a home, the latter might seem more economical. However, this perception ignores many unseen risks associated with homeownership.
Homeowners bear various risks, including fire and earthquake risks.
Taking out insurance to mitigate these risks erodes financial benefits. Buying a home often entails taking out various insurances, which can lead to financial strain.
For example, if one’s income stops, they might need income protection insurance or other costly policies. This can lead to increasing financial strain month by month.
Purchasing a home can feel like gambling in some aspects.
