We had grown up listening to roti, kapda, and makan dialogues. It always had been a dream for every earning individual to own a house in their name. But with changing scenarios and improved investment options, getting a home loan to purchase a house or get a house on rent is a personal decision that can vary person to person according to an individual’s needs.
Here are some crucial factors to consider before making the decision :
1. Budget: Purchasing a house is a very expensive affair. If you are up to buying a cost-friendly house, then you will probably end up buying a house on the outskirts of the city with fewer amenities and probably very far from your work. Here, the housing loan comes at the rescue, which gives you the liberty to buy a house wherever you want. An average home loan interest rate these days is 8 percent per annum. You need to be well prepared and planned to deal with the house loan interest rate, and along with that, you will also encounter some upfront cost like inspection fees and 20 percent of the house’s actual price as the down payment in which the bank will not fund. Your home loan installment shouldn’t disturb any of your essential expenses till the tenure of your home loan.
The home loan interest rate is an important factor in deciding whether you should go for a loan or not. Before reaching the conclusion of buying a house or renting, you should compare the rent rates and home loan rates of the property you want to reside in. If you can own it at a considerable rate, then make the decision and go for a loan.
2. Location: With this updating world, your job also changes more frequently. As your job changes quickly, you also need to change your home. Buying a house in a new city every time you change your job is not possible. If you have a family, you also need to consider them, keep in mind that how much your child has to travel to school and take account that how much your spouse has to travel to work. Too much traveling in daily routine can be very exhausting and take a toll on health. Renting a house puts you in place to look for the convenience of your family and choose the location which is suitable for everyone. This will also save your money and time to commute to your workplace daily.
3. Asset creation: The biggest pro of purchasing a house is that you are creating an asset, and that is a handsome reason to buy a house. But building an asset can’t assure you that your investment will multiply in value. It always depends on how well real state business is doing at the time your selling your house. You also need to calculate the amount of debt and the interest you are possessing to buy that house and consider the amount of maintenance expenses that come with owning that house.
4. Income generation: If you are buying a house with a mindset of giving it further on rent, then in India, rental yields are not high. It can lighten the load of EMI but will bring a lot of problems associated with it. You will have to cater to different demands of tenants and their specific needs. Collecting rents from tenants also take a lot of effort sometimes. You will not face these issues if you invest the money into an asset fetching higher returns, like equity-based mutual funds or shares.
5. Flexibility: Renting a house certainly gives you better flexibility to change your home and leave the house anytime with prior one-month notice. By renting a house, you can keep changing your house and enjoy the latest amenities and proximity to your workplace. But sometimes you need to have a stable location where your family can live on their own than buying a house is a great option.
To rent a house or buy it? Only you can decide after considering your financial condition and calculating all the factors. Both have their own pros and cons. Whatever your decision is, only you have to pay for it. Hence you should be very calculative before getting to any conclusion.