Whether to Purchase or Not to Purchase a Home – Dilemma of Millennial

With skyrocketing property costs and a gradual increase in the home loan rate of interest, many of you may be looking to rent instead of purchasing. When deciding whether to rent or buy, you must consider various factors, including financial implications and lifestyle. Let’s weigh the options. 

While owning a home through a LIC home loan atlowerLIC home loan interest rates or through any other home loan lender is a tell-tale sign indicating success for many, it may be tough to compare renting and buying. While renting permits you to move whenever you select and needs less investment, purchasing a home may be a profitable investment that may allow you to enhance your equity and wealth. 

Read on to determine the best match for yourself – 

Financial aspect – 

Buying and renting have distinct up-front expenses. When you own a house, you become liable for more than your monthly home loan EMI repayments. You are responsible for managing other expenses like renovations, repairs, taxes, maintenance, and various other dues. Owing a home can simply become highly expensive than renting owing to such additional expenses. Just utilities and rent are typically the responsibilities of tenants. Everything else is the homeowner’s responsibility. To move in as a tenant, you must pay just a security deposit.

Forming wealth – 

As you continue repaying your home loan balance, you will enhance the equity of your home. According to the local real estate conditions of the market, equity even grows with the rise in home value. If you require borrowing money in future, home equity enhances your net worth, which can be used as collateral for the loan. It is crucial to note that the property values might even fall based on the market condition. 

Still, tenants can build wealth. However, you will require a distinct strategy. If renting is extremely less costly than owning, you can form your net worth by investing the difference. 

Repair & maintenance – 

Owning a house is a major commitment. For this, you must prepare yourself for all responsibilities, whether for maintenance, repair, or upkeep. In case you rent, most of the repairs and maintenance will be taken care of by your landlord. But you are liable for massive damages created by you as well as the landlord would charge you for this. 

Flexibility – 

Assuming you may require relocating in future, renting is a highly adaptable alternative. In case your employment changes or require relocating, you can either break the contract or end the agreement, post giving a month’s notice and pay the specified charges in the rental agreement. As a homeowner, you do not have much flexibility when it is about relocating. It must be rented out, sold, or left empty. 

Next, with renting, you primarily must accept all the conditions mentioned by your landlord. Making renovation or minor alterations to your home is not something that you can do in a rented home. However, if you become a homeowner, you get the freedom. 

How can you choose?

Making a choice involves factoring in your financial condition and how renting vs buying would impact you. You can simply zero on which alternative is better for you by striking comparison between the estimated home loan repayment and estimated rent payment. 

Also Check: LIC home loan interest rate

Compute your monthly loan repayments

Your monthly repayment towards the home loan will be based on the down payment, price, repayment term, interest rate and property taxes. Note that the decision to avail a home loan is highly dependent on your credit profile. Ensure to use an online EMI calculator here to get a basic sense of your monthly home loan repayments. 

While becoming a homeowner is typically the dream of almost all Indians, skyrocketing property costs, particularly in the metros, have resulted in individuals opting for renting instead of purchasing. However, for individuals who can buy a home, the choice between renting and buying is mostly a difficult one. In the Indian context, this is observed that those who can afford to buy a home tend to put a higher emphasis on becoming a homeowner, and for them renting may come across as a compromise. For sure, there are definite benefits and drawbacks to both choices, and a few of the benefits are featured below –

Benefits of becoming a homeowner over rental accommodation – 

∙       This endows a sense of pride and security in homeownership.

∙       Rent is an expenditure that is incurred each month without forming any physical asset. Paying EMI, however, has twin benefits; it not just offers 1 month of shelter but even enhances the proportional ownership in the home.

∙       With renting, you often must relocate, which entails sufficient wasted time, energy, and money. However, this is not the situation in the case if you become the owner. 

∙       Real estate investment is a highly safe investment that is backed by a real asset, which holds the potential of providing tax benefits and capital appreciation. 

What are the benefits of renting?

∙       Renting doesn’t overburden you with EMI repayment, home tax and other crucial legal issues that form the part & parcel of home ownership. 

∙       Renting usually endows a feeling of reduced liability. One can rent a home worth Rs 25 lakh in metro cities for just Rs 15,000 – 20,000 a month. At times, if you purchase a house at the same expense, you may have to shell out nearly Rs 40,000 – Rs 45,000 as home loan EMI. 

∙       You can rent closer to good schools or your work location. However, if you think of buying a property, it may not be available within your budget. 

The decision of renting or owning is not an easy one. Just a careful evaluation would assist you in reaching a proper conclusion. Let’s make you understand this with a financial implication through an instance of an individual who wants to buy a property in Delhi. The initial step he must do is compute the capital required to purchase a ready-to-move-in home. If it crosses his budget, then he may opt for a home loan and arrange for the down payment amount. Besides computing the cost of owning a property, he must also compute the cost of renting the property in the same location. In case renting the property, the cost is lower than owning it, and then it is recommended to continue with renting. If not, then buying the property is a better option. 

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