There has been a saying that owning a home is an “American Dream”. Also it is associated with a lot of considerations that might end up giving way to nightmares. People generally get baffled between ‘buying’ and ‘renting’ a house. And many a times renting wins, especially in a city like Bangalore. Frequent transfer in jobs, troublesome cash flows, risk associated with buying or may be the person wants to explore more and not want to bind him/her to a particular location can be a few reasons for this.
But if we analyze properly, we will definitely come to a result that buying is a better option. Let’s examine the reasons behind this –
- A Good Investment: Buying a house is considered as the biggest investment in your life. The value of the property you dwell in increases with time, giving you better return on your investment. If you buy a home which you can afford at present, in future it will fetch you wealth. As Per Indian Expess, “Mid-segment residential properties in Bengaluru market have seen the highest average capital values appreciation in the last 3 years (H1 2011–H1 2014)”. The rate of return you earn while owning a property is probably much high from what you can earn from other investment choices available. So make your choice a financially savvy one.
- Gain Home Equity: When you rent, the payment you make every month provides you with a place to live, but won’t provide you with an asset to sell when you decide to move.But buying a home builds equity, i.e. asset. Home value rises every year by 4%-6% and you can build equity as you pay down your mortgage. Subtracting the amount you owe on your home loan from the total value of your house gives you the home equity. In this way, the net value of your asset also increases. For example, to increase your home’s value rise, you can improve your kitchen or other rooms, ending with more equity. Thus owning a home is one way to build equity or savings for your long term needs.
- Gain Tax Advantages:Owning a home causes a reduction in tax payment every year. Your interest on mortgage andproperty tax you pay in a year,can be deducted from your gross income which reduces your taxable income. Thus with these tax deductions, government is indirectly subsidizing your purchase of home. This way it is cheaper to buy that rent a house as the bulky monthly mortgage payment is a hidden blessing.
- Stabilize Payments: Monthly payment might increase while renting. But in case of ownership, if you go for a fixed rate mortgage, you will be paying a fixed amount every month as EMI for the long time period. This helps you to plan your finances well.
- Secure Place for Family to Live:When you rent a home, there’s always a risk that you might have to vacate it whenever there’s a notice issued by the owner. Also renewing a lease or agreement every year is a hard job. But when you buy a home, you certainly buy this security i.e. a better and safer stay without any outer interference.
- Gain a Sense of Community: Your own house consigns a sense of belonging attached to you. It gives you a base to care for your locality, neighborhood and community. This emotional touch mostly goes missing while you rent a house.
- Build a Strong Credit History:Buying a home compels you to make your monthly loan payments in time. This builds up your image as an appreciated borrower. This creates a strong credit history for you and works in you favor when borrowing loan for some other future requirements.
- Privacy and Independency:Renting a home might make toy stay in the same apartment with your owners in same or may be different floor. This hits your privacy negatively. Also, youare not free to do anything with your house, and you have to stick with the points mentioned in the agreement. Any kind of renovation or changes won’t be acceptable nor does it make sense to spend money on costly wallpapers or tiles as the end beneficiary is the owner of the house and not you. Thus, with buying a home you get your privacy and the freedom to create an environment you want to.
- Mortgage is a Forced Saving Plan:Buying a property cleverly makes you save in a long term.First you are bound to pay the mortgage every month and a portion of it goes towards principle and second the value of your home appreciates every year.
- Can be used in Future for Resale:Buying a home create asset for you and can be resell when you are in dire need of money. But in case of rented homes, you have no choice of resale.
- In Long Term, Buying is Cheaper than Renting:When you go for a rented house, initially monthly rent might sound less in comparison to down payment and EMIs. But with time, the interest part of your payment decreases and becomes lower than the rental amount.
We all dream of our own home. But there are facts which we dread off and thus shift our focus towards renting. If we minutely interpret the long term aspects, it is seen that owning or buying a home is a wiser choice. It is not only fruitful towards your economy and finances but also helps you to evade a lot of little things that you might have to compromise while living on rent. So while deciding on renting or buying think over on long term aspect. Why pay more to live somewhere which you don’t even own?
By – Team Wienerberger India /Wienerberger India Building Experts
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