Should You Take A Loan To Buy A Home Or Live On Rent? – Forbes Advisor INDIA
A home could give one a sense of security, comfort and an accomplishment. But buying a home entails huge expenses and a long-term financial commitment. It is, hence, important to understand what works best for you — choosing to buy a home or rent one.
Pros and Cons of Buying a Home Vs Renting
Buying a house, though is a big decision in life, has certain benefits.
- A house is an asset which appreciates over a period of time. It gives you a sense of stability and increases your net worth.
- You will be free from the fear of eviction which is always there in a rented property.
- If you buy the home with home loan you will be able to avail tax benefits under Section 24B of the Income Tax Act.
- A home also increases your passive income if you think of renting it out. Moreover, you can redo your home whenever required, which is not the case in a rented property.
Compare this with living on rent, which may initially sound perfect.
- In due course, you will realize that every month a lump sum amount is going out of your monthly budget without creating any asset for you. You will also have to bear the annual increment in rent which goes away from your wallet. It does not help to create any asset for you.
- Normally, renting contracts continue for a period of 11 months and in case, if the landlord does not renew your contract you may have to relocate yourself which could seem like a painful process.
However, renting could give you the ease of residing closer to your workplace and offer you the flexibility in terms of changing locations as and what your profession demands.
Things to Know Before Buying a House
Before investing your hard earned money in purchasing the property you should have a checklist in front of you which can help you to take the final call.
Earmark a Budget
You should always purchase a property that fits your pocket. Do not overshoot as that may put you in financial stress. Also, you should thoroughly check the hidden or additional charges that the developer may ask for once you book the property.
Location of the Property
The location of the property should be convenient to all the family members. Do a SWOT analysis of the location before taking the decision. Keep in mind that the locality should be well connected to the important city areas and there is a good public transport facility.
Clear Title Deed
Appoint a lawyer who will do a due diligence of the property.
If the property titles are free of any hassles then there will be no complications going forward. Ask your lawyer to go through the builder-buyer agreement very carefully.
This is an important task before buying a house. You have to find out whether there is continuous availability of water or not. Whether the locality faces long hours of power cut during summer months. Poor air quality has become a major issue these days. Talk to the people in the locality about the air quality.
The area where you are buying your house should be safe for your family members. You need to be very careful about the safety aspect.
Before buying the property, take a tour of the locality to find out whether there are schools, colleges and hospitals nearby. Also check the shopping facilities in the area to meet your daily needs. Pay attention how far the property is from the nearest police station, fire station, parks and playgrounds.
Quality of Construction
This is a crucial thing that you need to take care of before you put your hard earned money in the property. Take help of a qualified structural engineer to judge the quality of construction. Do not ever go by the look of the structure.
Keep in Mind the Resale Value
Someday you might take the decision of selling your flat and move to a different location. Keeping that in mind, buy properties that are easily saleable. If you buy a flat from a reputed builder in a good locality then chances are that you will not face much trouble to sell your property and get good prices.
If you are purchasing a new property, ensure that it is RERA registered as it protects you against structural defects for the next five years.
Mistakes to Avoid When Buying a House
The first time home buyers tend to make more mistakes than the experienced ones. There is a checklist that should be followed to avoid any mistakes:
Check the Exact Price of the Property
The final rate of the property may go up if you opt for a home loan as you have to take into consideration expenses like processing fees, documentation charges, legal fees, valuation fees and others. In addition, you will have to pay the stamp duty and registration fees while purchasing the property. Some realtors also ask for yearly maintenance in advance. So, calculate every penny to arrive at the final cost of the property. This will help you to avoid any financial hiccups going ahead.
Do not book property before checking loan eligibility
You have to be very meticulous to check your loan eligibility before you book your home of choice. For instance, you book a property and then go to the lender for a housing loan. The lender may refuse to give you the entire loan amount after assessing your income and repayment capacity. Therefore, it is always advisable to check your loan eligibility so that you do not drag yourself in a financial mess after booking your property.
Depending upon your financial health, lenders may offer you a loan which is higher than what you had anticipated to get. Always adhere to the basic rule of purchasing a house which is lower than your actual repayment capacity so that you can always enjoy a financial cushion. Do not overexpose yourself.
Shed the flab
Realtors these days offer houses with additional amenities like gym, an auditorium, jogging track, clubs which you may not use regularly. But you have to pay more for all these amenities while purchasing your house and subsequently carry on the burden of higher maintenance charges. Work on what amenities you require and then book the property accordingly.
Keep your options open
You may make a decision in a hurry in fear of losing out on a good home deal. It is important to visit a good number of projects in your preferred locality before zeroing in for the property of your choice. Be rest assured that you will always get an option that suits your pocket and fulfills all your requirements.
Ready units always don’t work
There is a tendency among home buyers to buy ready units in order to avoid the dual burden of paying rent and EMI simultaneously. Many a time, an under-construction property might offer better options in terms of location, amenities and price.
The only drawback is the window period. Carry out research on projects that will be completed within a year’s time or a little more. This may lead you to owning a better property at a lesser price.
Undoubtedly, renting gives you more flexibility to choose your place of living, but buying a home gives you a sense of satisfaction and accomplishment. Your home is an asset that you have created for yourself and your family. But you should decide on the right time to buy the home as buying a home is an important milestone and one should be prepared for it and save money to make the initial down payment.
One should also calculate his monthly budget properly so that the EMI does not become a burden to him. The home asset appreciates with time and the home is ultimately an investment worth making for the long-term.