Buying a new house is a huge decision in life to make, but is it right for you? Buying a property is considered a long time investment history itself shows the increase in property rates. However, one must keep an eye on property rates and location before buying a new house. You can also avail some tax benefits that you get on by getting home loans.
Whereas, renting a house is often assumed to be much more affordable than buying one. Renting saves on the amount that is spent on the down payment. Rather than spending the money on a down payment, you can also spend the money on the PPF or on some other investments. You can also receive large portions of interest by investing your money.
But which one is correct for you, buying or renting? Let’s find out here.
Buying vs Renting: Advantages and Disadvantages
Let’s start with making a list of advantages and disadvantages for both Buying and Renting.
Buying advantages and disadvantages:
Advantages:
- Your home is your investment.
- No uncertainty.
- You have the freedom of living as you want.
- No landlord issues.
- You get tax benefits on home loans.
Disadvantages:
- The home value may decrease over time.
- Moving into a new house can be very expensive.
- Buying a new house is very costly.
- Maintaining a house is very expensive, as well as time-consuming.
Renting advantages and disadvantages:
Advantages:
- No responsibility for home maintenance.
- Rental cost is less than the buying cost.
- Even if the value of the home decreases it does not affect the renting.
- Easy to move to different/new locations.
Disadvantages:
- Rent could increase over time.
- You have to live according to the landlord.
- There’s less stability in renting as compared to owning.
- Landlord may decide to sell the property or cancel the agreement.
4 Decisions that will help you choose whether to buy or rent.
- Calculate the amount of time you want to live in the same house:
You first have to decide whether you are looking for a house for long term living or short term living. If you are certain that you will stay in that home for at least 5 years or more, then buying it makes more sense. That’s because buying a new house is expensive and you’ll have to put in a high amount of time, investments and your emotions.
However, renting is a better option if you are looking for more flexibility and short term living.
- Estimate the total cost of Buying and Renting:
Renting can be a cheaper alternative than buying a house because of the upfront costs involved. It includes the down payment, maintenance costs, moving costs, repairs and other miscellaneous costs.
On the other hand, buying a house can be a cheaper alternative in the long run as with time the cost of the house increases and with time rent also increases. Sometimes, rent is much more than the mortgage payments.
- Calculate the risk of buying and renting:
There are risks for both buying and renting a home. Even if you generate the money to buy a new home there are some financial risks associated with it. First is you could lose a lot of money if there’s a downturn in your real estate market. Or, if you have to sell it soon you may not be able to cover the money that you invested in buying.
Similarly, rent goes up with time. You’ll have to calculate the increased rent and you’ll also have to live according to the landlord, such as being asked to move out anytime or you’ll have to face the delayed maintenance.
- Look at your Budget:
It’s important to note that you need to be certain with your budget while deciding between renting and buying. While thinking about buying, you should have a clear image of all the expenses that will be incurred in down payments, maintenance, new furniture and moving costs.
There will never be a clear answer to this question of whether to buy or rent an apartment. It’s a debatable topic. It depends on your life situation and budget. The answer might change over time if you have the budget you can buy it, if not then rent it.
Some people have the budget to buy a new house and buy it for their retirement, or for investment purposes. Buying or Renting is one’s personal decision but it is always better to live in your own home rather than a rented house.
If you are ready to own a property and you need to begin with your dream home buying process, you can get started by contacting prodigy assets today.