Hi, I am Gunjan Grover Today we will talk about- Which is better, Buy or Rent a house?
This debate is going on for years. This is a very common topic of discussion among people. Everyone wishes to own a house, which he can decorate on his wish.
But buying a house is not so easy. Rates of properties are touching the sky. Salaries don't match up with it. People want a good lifestyle, also space They find renting a better option. But one cant find financial security in a rented hpouse.
There's always a conflict whether to buy or rent a house. Many emotions are attached to a home. When it comes to finances, emotions won't work. What are all factors to consider while taking this decision? What steps are to be taken to buy a house? We will tell you about it in today's article.
Common Questions we hear
Everyone wishes to own a house. Everyone has a different reason. If you stay on rent, you will have many questions If no, then your relatives or friends will ask you First, the rent you are paying, you can give for EMI. Then the house is yours.
The rent you paid in so many years, could have bought you a house. Second, your parents will pressurize you to buy a house for security. Or to fulfill your parents' dreams, you want to buy a house. Mostly we see in ads- ''Father's dream, House is ours". Third, peer pressure.
When all your friends will buying houses, then you will also want to. Another, spouse pressure. So these were social and emotional factors for the 'Buy vs Rent' argument. Other than this, there is another factor which is Financial.
Factors on which we buy property
To decide on this, you need to consider these 3 angles. Financial, Emotional, Social Lemme tell you about the thumb rules of Buy or Rent a property.
What is Rental Yield?
First, we'll start with Rental Yield. Rental yield is the return on renting a property. In India rental yield varies from 1% to 3%. That means if you rent a property, valued at Rs.50 lac and its rent will be around 2% i.e. 1 lac a year. That means 8500 per month.
How to purchase a property/house?
If you think of buying this property, you have two options. Either you go for a downpayment of 50 lac or take a home loan.
Home-loan
If you are thinking of a home loan, then downpayment of some amount has to be done.
There are other expenses to buy a property like stamp duty, taxes, interiors and maintenance charges, etc. So you need to consider whether you can afford this amount not or not.
Financial Factor to consider
A rented home no doubt does not have the same feeling of satisfaction as your own home. But at the start of your career, buying a house can affect your finances. But that doesn't mean, you need to stay in a rented house forever.
In terms of finances, renting is a better option than buying in India. here the home loan rates are high and rental rates are low.
Emotional Factor to consider
After all, we are humans and our heart doesn't stop wishing. Emotions play a big role. We want our own house. We can decorate our house as we wish. We can spend more on it which we can't in a rented house.
Social Factor to consider
To stay in a society, we need social status as well. So it's logical to set a financial goal to buy our own house.
Financial Goals
Saving aggressively and invest in the right financial instruments to earn inflation-beating returns. And when you have enough funds to make a sizable down payment, then that is the time to buy a house.
Down payments and EMIs
Now how much down payment is ideal varies from person to person. You have to make this decision. Let me tell you the different possibilities which will help you in this decision. In our last example of 50 lac property, we have different options of down payment size to buy it. This will help in choosing a viable option.
I have considered 8% interest and 20 years tenure. We have discussed your financial, emotional, and social factors.
Steps to follow your Dream House
Now, what are the steps you need to follow to buy a house? First- Do not take a high EMI loan to buy a property at the start of your career.
Even if you need to stay in a rented house but you need to prepare to buy a house. Saving aggressively and invest in the right financial instruments which can beat inflation rates. When you have enough funds to make a sizable down payment, and EMIs are manageable, then take a loan and fulfill your dream.
Also remember to take care of your financial, emotional, social, and health at the same time.
On that note, here's me, Gunjan Grover, Signing off. Bye-bye Take care Keep calm and Invest on. Don't forget to like and share this article.
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