Owning a home is a cherished dream for us Indians. However, with changing times and requirements, renting vs. buying a home is where the debate shall always continue. There is a huge movement of people across the country and the globe for better job opportunities. Buying a home doesn’t necessarily mean you would spend all your life there. For better employment prospects or family needs, you may need to shift to other places, too. Also, buying a home needs a large amount for the down payment, which means a deep cut into your savings.
Renting vs. buying a home- the answer will depend on various factors and on your financial circumstances- your budget, your lifestyle, and where you live. Let us dive deeper and understand the pros and cons of both.
Buying a home
Renting vs. buying a home is a perpetual and perennial debate. However, with enough cash on hand, you may buy a home without any pre-planning. So, those who need to arrange finances need to first qualify for a home loan. This means that you must have a good credit score, sufficient money for a down payment, and must be able to afford a monthly EMI.
Pros
- Physical Asset
Buying a home is creating an asset for a lifetime. It inculcates a sense of pride & security and pride. Owning a home is owning a physical asset that will be appreciated over time. You’ll also gain equity as your home increases in value, either by market appreciation or improvements made to your home. This means you’ll get money if you sell.
While it’s a matter of pride to live in your home, whenever you plan to sell it, you can earn a handsome amount. The ability to improve the property and increase the property’s value
- Increased Networth
When you buy a home, you also build your net worth. Real estate investment is a safe investment backed by a real asset.
- Tax advantages
There are also tax benefits that come with homeownership. You get tax benefits on the principal amount and the interest payout.
Cons
- Must meet lending requirements for credit scores, debt-to-income (DTI) ratio, and down payment to qualify for a mortgage
- Requires additional cash reserves for maintenance, repairs, and replacement
- Renting will not overburden you with EMI payments, house tax, etc. When you are facing financial issues, you may shift to a lower rental place, but for your own house, there will be a stipulated amount that you have to pay. Come what may!
- Risk of losing property and equity if you are unable to make payments or pay property taxes
- Less flexibility if there’s a need to move.
- When you rent a home, you will always have a choice to rent closer to work or closer to good schools. Owning a home in your desired location may not be affordable or within your budget.
Renting a house
Pros:
- Fixed expenses
Every month, you know how much money you need to shell out. You may budget a certain fixed amount for the rent and accordingly plan other expenses.
- Repair
If you rent a home, most of the repair and maintenance work is paid for by the owners
- Flexibility of movement
If you switch to a new office located far away from your home, it will be easy for you to move to a new location if you have a rented home. Similar is the case if your child needs to attend a school a bit far away from where you’re currently staying. Moving out of your rental is typically much easier to do in such scenarios.
Also, renting a home is a better option if you don’t have plans to stay in an area for a long time.
- Tax
As a tenant, you don’t need to pay any taxes. Homeowners need to pay property taxes and other municipal taxes annually.
All in all, renting is often less expensive than owning a home.
Cons
- While you pay a fixed amount as rent every month, you don’t own an asset.
- The rental values may vary; the rent may increase every year.
- You can’t customize your home as a tenant since you don’t own it.
Renting vs. buying a home- it all depends on your financial situation and goals. Take into account your current financial situation, lifestyle needs, and long-term goals, weigh the pros and cons of each, and make an informed choice.
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