Having a house of your own is the childhood dream of almost every individual. But as easy as it seems to say ‘I am going to build my dream home’, this desire seems a little far fetched in the practical world. Though owning a house is of a great sentimental value and gives you a feeling of self-conformation but with the all-time high inflation, continuously upgrading standard of living and a stagnant salary, renting a house seems more rational otherwise one can either dream of owning a house or keep on compromising on his/her wishes to pay the big fat EMIs.
Possessing a home keeps you grounded and gives a sense of security and ownership. You feel more confident to take care of your family and owning a house is in itself an accomplishment. It is a necessity and upgrades your position in front of your family and friends.
Solving the dilemma
Go through the cost involved in both options. While buying a house, if you opt for home loans, banks only lend 80-90% of the property amount and rest is up to you. See if you have that kind of money available and it should not affect your emergency funds and basic life expenses. Arranging such a big amount in a lump sum is difficult for an average salaried individual. Apart from the down payment you need to pay the stamp duty, processing fee, registrations etc.
While renting a flat, you need to pay a yearly or half-yearly security deposit in advance, brokerage amount and relocation charges. Do not show any desperation while searching for an accommodation and bargain for the lowest rent possible.
Price to rent ratio
This is calculated by dividing the cost of house by annual rent and if the ratio is below 15, then go forward with buying a house otherwise rent it. Do not go for renting a flat when annual rentals are higher than 5-6% of property value.
Property price rises exponentially and there is no guarantee on the rise and fall of real estate. It may double or half or keep still in the near future and so do your interest rates.
House rents increase gradually with adding years, it is generally 10-15% increment in rents and it fits perfectly with your gradually increasing income.
For most buyers, the decision to buy is either based on their understanding of the market or on their financial ability to make a purchase. Also there is a high property value and still increasing but low rentals.
If you are a salaried employee see to it that whether you have a regular income or not, the extent of your job security, whether you would be able to pay the rent or heavy EMIs if you lose your job, face any decrement or switch to another company.
Banks do not give home loans without thoroughly checking your employment record. Also, before buying a house, you must take into account the salary hike you expect over the next few years because your EMI may rise sharply when rates go up. So, it’s better to rent if you are not sure about your employment behavior.
Duration of stay
Buying a house makes sense only when you are absolutely certain that you are going to settle in that place for the good part of your life. If you are regularly on a move because of your work, it is not a wise decision to buy a house in some place and then leave it at the discretion of a care taker or barren and living on a rent oneself.
Ease of disposability
Before buying a house, see if it is well connected to the basic amenities like hospitals, parks, shopping complex, schools etc. Also, lookout for the neighborhood and the current and future property trends of that area. This is because if it comes to that and you need to sell the house you are cheated into a low return and face a loss.
With renting a place you need not worry about leaving the house, you just pack your bags and shift to another location.
Inflation and expensive lifestyle
With all time high inflation and constantly increasing cost of living it is very difficult to keep up with the house EMIs and maintain your lifestyle. You EMIs should not exceed half of your monthly in hand income, if it does may be you are not financially stable enough to buy a house. With the floating rates of interest no one is certain how much you are going to pay in the next EMI. Living in a rented space gives you the liberty to cut down on compromises and enjoy your life as desired.
At last, it may be advantageous to buy a house early in your life so that you are all done with the repayment till you achieve retirement and can live peacefully in a house of your own. Buying or renting a house depends on your choice and availability of money and also what you hold prior in your life. At the end, having a house to your name always brings pride.