Buying a house is the most important financial decision for most of us. For most it is also an emotional decision. It is a big investment and therefore it is important that the purchase is a sound decision after considering all aspects and pros and cons. Another way to have a roof over your head is to rent. It is not easy to decide whether to rent or buy. There are various factors – monetary and non-monetary, that one should look at to decide whether at this point in life, it is better to buy a house or rent a house -
Financial Stability – It is important to assess your financial stability before buying a house. For example if your monthly income is Rs. 50,000 then you will be entitled to a loan of about 20-25 lakhs depending on the bank and its conditions. You should be ready to give a down payment of about 20% of the house's price initially. There will be registration charges and stamp duty to be paid. You should compare the take-home salary with EMI and living expenses. DO you have some money left after all your expenses? You should have an emergency fund for about 3-6 months as well if you are taking a loan.
Will you live in it for long? - Why are you buying the house? Will you stay in it for at least 5 years? If the house is going to be unoccupied, it does not make too much sense to purchase and keep it. There will be maintenance expenses and hassles of keeping the house liveable. Even if you are buying the house without the intention of living in it but for investment purposes, buy in such a place that there will be appreciation. If it is for investment purpose, ensure that the investment horizon is at least a minimum of 5 years. You should also take advantage of tax breaks for purchase of house.
If real estate is appreciating and interest rates are low, it might be a good idea to buy a house.
If the property prices as well as rents are rising, it might be a better idea to invest in a house provided other factors support the 'buy' decision.
If property prices are on a falling trend, but rents are rising, it is better to rent a house.
Other factors – There are non-monetary factors to consider as well. Do you prefer to live near your office, but cannot buy a home in that area. Maybe you can rent a place around that area which might be okay to live for sometime but not to buy a house. The price of flats that have amenities like malls, recreational facilities, swimming pools within or nearby are steep. If you cannot afford them, you can live on rent in such residential complexes. If you have a transferable job, it makes sense to rent as you are not sure, where you will be for a longer term. Owning a house is a huge responsibility. You have to maintain it, refurbish it and pay maintenance charges regularly. There are rules that a house owner has to follow in a co-operative society. If you are living on rent, you do not have to worry about stamp duty and registration. You have to pay rent on time, and ensure that you keep the property as-is which is a lot less responsibility.
Let us know what factors led you to make your Rent v/s Buy decision.
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