Monday, December 30, 2013

To Buy or To Rent?
An eternal question asked by those looking for a home to move into: Is it a better idea to purchase a house or simply rent one? The answer cannot be generalized, and depends on certain factors such as:
· Your income (most important factor)
· Number of family members
· The location, city and current market value of real estate.
· The rent to emi ratio

The first question you should ask yourself is how long you plan to stay in the house you are looking for. If your purpose is permanent in nature, then yes buying a home is the best option. Yet, the choice continues to daunt us, so let us take a look at how you should compare and choose between these options:

1) Monthly expense

Compare how much you will have to pay towards your monthly rent and your equated monthly installment towards your home loan. The point is to have an overall expense estimate for the duration you have in mind.

2) Convenience of location

See whether the house you have chosen to purchase is located in fair distance of the schools and offices. If not, renting a home in the said area is a good idea, until you find a suitable home to buy.

3) Down payment value

When it comes to availing home loans, you must know that only 80% of your property's value will be funded by your bank, the rest 20% needs to be arranged for from your personal resources. This involves some prior planning and saving. Similarly in the case of a rental home, you will be required to pay an advance sum (an initial amount before you move into the place) which is usually 6 months to 1 year rent value.

4) Amenities check

Keep a checklist of the amenities you want and cross check it against the amenities you find in the house you are looking for. This will help you analyze if the house is worth investing in or renting.

5) Percentage of rising cost

Keeping in mind the rising cost of real estate and interest rate of your home loans, similarly the percentage increase in your rent; evaluate and compare which is affordable according to your income and choose the one that is most suitable to your family as well as your finances.

6) Investment advantage

The one advantage that comes automatically with purchasing your home is that you are making an investment. Even if you don't plan to sell or rent it in the near future, with the ever appreciating value of real estate your home is bound to increase its worth, through the times. Obviously, you don't enjoy this advantage in your rental home.

The choice is yours, but let it be an informed one.

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