While owning a home is typically the dream of every Indian, sky-rocketing property prices especially in metros have led people to opt for renting rather than buying. However, for people who can afford to buy a house, the choice between buying and renting is always a tough one. In the Indian context, it is observed that people who can afford to buy a house tend to put more weightage on owning a house and renting is mostly a compromise. There are definite advantages and disadvantages of both the options, and some of the advantages are summarized as:
Advantages of owning a home over rental accommodations:
# It gives a sense of security and pride of home ownership.
# Rent is an expense that is incurred every month without creating any physical asset. Paying EMI, however, has dual benefits; it not only provides for a one month of shelter, but also increases the proportional ownership in the house.
# With renting you often have to relocate which entails a lot of wasted time, money and energy, but that is not the case with owning.
# Real-estate investment is a safe investment backed by a real asset which has potential of capital appreciation and tax benefits.
Advantages of renting:
# Renting does not overburden one with EMI payments, house tax and other legal issues that are part and parcel of property ownership.
# Renting generally gives a feeling of lower liability. In metro cities you can rent a house worth Rs 50 lakh for only Rs 10,000-15,000 a month. At the same time, if you buy a home at the same cost, you have to shell out anywhere from Rs 30,000 – 40,000 as an EMI (equated monthly installment).
# One can rent closer to work or closer to good schools, but the same properties may or may not be affordable or within one’s budget.
But talking deeply, buying is always better than renting. How?
Lets understand.
Are you feeling confused between buying and renting a house? Almost every individual struggle to decide which the right option is. Buying a home can take away all your savings and will be a big lifetime expense. Additionally, you have to deal with the recurring formality of paying property taxes and home insurance payments to keep your asset safe and protected. Day-by-day maintenance of the house may get expensive. It is recommended that a homeowner should have a plan to save between 1% and 4% of the house value so that he/she can use the saving in the account of maintenance as and when required.
Keeping aside the costs for investment as a house value, buying a home has many benefits too. Someday, the house you purchased will be more than its purchase value. You can even opt for an income with the house you own. Paying all your mortgage will make you the owner, it will add more score on your financial credibility, and you can easily plan for a comfortable life after retirement with a permanent shelter as a standing support. The sense of satisfaction that one has when he/she says “I too own a house” is invaluable.
Benefits of Buying a Home vs. Renting
Easy to Customize Your Dream Home if You Buy a Home
Whether you require a bigger bedroom or you wish to renovate the terrace garden, or you have a plan to add an extra space in your basement, owning the house means that you have the sole freedom to do whatever you like and not to worry about your security deposit also. Whereas rentals come with a list of do’s and don’ts. Living in somebody else’s house compels you to follow the petty rules of the homeowner as the landlord has the ultimate control on the house. You need to take prior approvals to implement even a small remodelling in the premise.
Purchasing a Home is an Investment for your Future
Owning a house is an investment for you and it is a security in the future for your family. The house you own will be left as an asset for your family. Purchasing a home can be your smartest decision in life. You can even purchase a home and then sell it after some time with a profit. A house is a financial asset for many people that constitute a major share of their net worth. The value of the house can leverage to help some people to reach their financial goals with easier progress.
Benefits of Buying a Home Would Provide Tax Benefits
Home ownership can fetch you tax benefits by deducting the mortgage interest as well as the principal payments. However, the problem does not end here, as homeowners will have to deduct their eligible expenses and need to avoid the federal taxes on the earnings they get by selling the house. You will not get tax benefits if you rent a house, however, purchasing the house will give you manifold benefits.
Owning a Home is much Cheaper than Renting
Considering many situations, paying rent is more expensive than purchasing. Indirectly, you are paying your homeowners mortgage and helping in building your landlord’s equity and credit. Homeowners often ask for a high rent to make a profit. They charge their mortgage cost and additionally charge money to pay for the rental management of the house and upkeep them. They sometimes even charge more than their regular mortgage payment. This excess payment indirectly helps them to build their equity so that they own the property very soon. The costs also add up in owning the home that is often more affordable than renting a home.
Buying a House means Building Equity
The most significant benefit of purchasing a home is building equity. This is your share of the value of your house. If we speak in strict technical terms, it is the difference between the market price of the house you have purchased and the amount that you still have to pay. However, if the value of the house appreciates, the equity of the house will increase no matter if you owe the amount or not.
No Landlord will Kick you Out When You Own a Home
You may not be able to find homeowners who are desperately looking to rent after receiving the eviction notice from current landlord. If you own a house, unless the bank decides to foreclose on the house, the house will be yours until you plan to sell the house. Sometimes landlords evict the tenant even if the tenant has not done anything wrong. On the other side, being the homeowner of the house, no one can ask you to evacuate the house. Staying in the rented house may call for vacating the house anytime if the landlord decides to sell the house for any reason.
Risk Capital
Never consider your house as a stock market and view it as the earliest way to get rich. But there are chances that economy can surprise you and all of a sudden the graph of economy starts blooming, the price of real estate starts rolling faster with better price hike. Equity in the house is the other way to link a part of your portfolio to the changing growth of the economy. You can even go with that equity if you need a chunk of cash.
Having Your Own Hone Means More Energy Efficiency
You can make your house as maximum as possible energy-efficient. Purchasing the new glasses of the windows or frames can be done later at the end of the year. The energy-efficient improvements that you require from upgrading the unit of the air conditioner can reduce the monthly bill which can help you in saving. Owners can make ample green improvements. They can even install an energy-efficient roof. This is simply not possible if you rent a house.
Monthly Mortgage won’t Increase if You Buy a Home
Owning a house will lead you to deal with the fixed mortgage rates that will never go up even when other expenses tend to go up. You can protect yourself by making a 20% down payment and take a fixed mortgage for the next 15/30 year. This will help you to lock the interest rates at today’s date. Locking the mortgage in a low monthly payment will help you to take a big step to protect yourself and your family from inflation. On the other hand, if you rent a home, the landlord will raise the rent every time when you will plan to renew the lease amount. With a fixed-rate mortgage, the mortgage payment will remain the same every month for many years. The groceries or utilities that you buy may cost more, but not your house-instalment.
You can Rent Your Purchased Home to Earn
Owning a house is not the end of your goal. However, purchasing a house is a long time commitment. Many homeowners rent their houses if they purchase a second home. They even rent out the extra space that they have in their present home. Homeowners can earn more if they plan to rent their houses instead of selling and make an instant profit.
Your first purchased home should always be for an investment purpose. As when you are young, you can save, and get time to earn more. You can even get a second source of income. Before deciding to buy or rent, consider the above mentioned points like how long do you plan to stay in the same area, how much of flexibility do you like to enjoy, and finally are you prepared to take the responsibility of homeownership, etc.
Conclusion
In the end, buying or renting a property depends on your preference and personal financial strength. It is all about your discretion. But if you do not have huge bottlenecks, it is always wise to buy a house than living in a rented home.
Comentários