by akshayWhat is more beneficial, buying or renting a house?
It takes time to decide between buying or renting a house. It requires both emotional and financial planning. For some people, owning a home is a matter of pride, while others prefer to live in a rented house to avoid long-term financial expenses. Unlike in previous decades, it is not easy to buy a home, and that’s why many people prefer to rent a house.
Today real estate market is thriving like never before, and many real estate builders are now focusing on building cost-effective houses which common people can afford. It has transformed the decision of many customers who earlier used to prefer living in a rented house.
Now the most important question is: Which decision is right? Whether to buy or rent a house? Well! There are many factors that you need to consider while finalizing your decision. Below are some listed factors to which you should pay attention as per your financial goals.
Which factors consider before buying or renting a house?
Financial Planning
When we decide to buy a home, we have two options. You either arrange the funds or take financial help from any bank. Through any level of funding, you must save at least 40-50% of the base price while planning to buy a house. Rest you can borrow. While taking a loan, you must have a regular source of income to pay the EMIs. In case of job stability, you can buy a house. In case of instability in income sources, it’s better to live in a rented house. You must build a credit history and focus on your savings so that you can plan to buy a house whenever you are ready.
Commitment vs freedom
Renting a house will allow you to move around. But living in a rented home will be painful if you don’t prefer shifting every time. You need to look for a better house once your lease expires. Also, the rental value keeps increasing, and if your salary is not rising in that ratio, you will be forced to vacate the place in search of a cheaper house.
On the other hand, living in your own house gives you stability. You can remain rooted in one place. Your EMIs will surely be higher than the rent but remain constant throughout the year. But while buying a house, you must stay financially stable to pay your EMI on time. So, although renting is an easy option, it will become harder in the future, while buying a house will be hard initially; you will become stronger eventually as you build your equity. Living in your own home will give your family a feeling of freedom, safety, and capital appreciation.
How long do you prefer to stay in one place?
Your decision will become easy if you are clear about staying at a particular place. For instance, if you are clear to remain in a home for around 10-20 years, buying a house makes sense if you can afford it. Before buying, you must compare your rental value with EMI. If your job requires changing the place frequently, staying in a rented house is better. It will become difficult for you to buy and resell a house while changing location.
Better income and higher credit score
Taking a home loan to buy a house requires you to pay EMIs regularly. For this to happen, you must have a stable income. If this is not your condition, then living in a rented home is better until you become financially stable. You must have a good credit score to borrow at an affordable rate. If the credit score is low, your loan will be expensive, or in the worst condition; you won’t get any loan.
Also read: What is a CIBIL Score and how is it calculated?
Think about opportunity costs
Buying a home is the most important decision of life. You must be financially stable and consider your other life goals, like children’s education, etc. while taking this decision. Think about how this decision will impact your other goals. You can still buy a house, but you must balance opportunity costs to achieve your goals in due course.
Also read: what Power of Attorney (POA) is and its purpose.
Conclusion
To conclude, you must think about the long-term benefits of buying a home and the short-term benefits of staying in a rented house. Buy a home if you have enough savings, credit score, clarity of living at a particular place, and income stability. Otherwise, it’s better to live in a rented one.
You can also look for real estate builders who are selling homes at an affordable price. You might have to compromise on location, as getting your dream home at your desired location may be an expensive task for you. Start looking for different real estate projects and their prices right away, if you want to buy a home in the near future.
