Buying vs. Renting

Should you stop renting and buy a home?

If you’re ready for the commitment, you bet!

Yes. Buying a home is a big decision. A big commitment, too. But if you think it through, clearly understand your financial situation, and you’re ready for the short- and long-term responsibilities, it can be one of the most rewarding decisions you’ll ever make.

Why buying a home is a good idea.

Build equity: 
Every monthly EMI payment you make is part interest and part principal. The principal is what you owe on the loan and it goes directly towards your home’s equity. It’s like investing in yourself. Which is a lot better than 100% of your rent payment going to the landlord. Plus, whenever home values increase (and historically they do) so does the value of your home.

Tax advantages: 
The interest portion of your monthly payment is like any other interest. It’s the fee you pay for borrowing the money. However, the great thing about home loan interest is it’s tax deductible. And so are your property taxes.*

Loan options: 
There are different types of loans to choose from. So depending on your financial situation, and long and short term plans, you can apply for a home loan that will fit your needs.

Live your way: 
Do you feel comfortable in a sparse, minimalistic space design? Or do you like different colored walls and pictures everywhere? As a homeowner, you’re free to live, decorate and change your home however you want.

What the experts say.

Many experts believe it makes good financial sense to buy your home rather than rent. Experts predicted that rents for apartments would increase year on year nationally – by average 8% in 2014-2015 – and rents will continue to increase by 7.5% each year in 2015 and 2016.

If the average national home loan interest rate hovered around 10,5% (they’re much lower today), homeownership may well be a better investment of your money, especially if you plan to stay in the home for at least five years. Experts estimate that buying will be cheaper than renting until the 30-year fixed rate reaches 12%, more than what it is currently!

Important homeowner costs to consider.

Down payment: 
Different loans require different amounts.

Insurance:
Property insurance is recommended. Flood or other types of coverage may also be required.

Property taxes: 
Varies widely. Determined by local city or state government.

Maintenance and home improvement: 
From a leaky faucet to new paints, you don’t have to fix everything yourself, but paying for and getting it done is your responsibility.

Reasons to keep renting for now.

Sometimes, due to your personal situation and long term plans, renting is currently a better option.

• You anticipate a change in employment or income in the near future.
• You’re not comfortable making a long-term commitment to a particular location or area.
• You need to build a stronger credit history.
• You’re not prepared to handle responsibilities like leaky faucets, paint and other routine maintenance.
• You’re not financially ready to cover monthly and yearly costs for utilities, insurance and taxes.

*Everyone’s tax situation is different. Please consult a professional tax advisor.
** This summary is based on a Rs-30,00,000 home loan amount, loan term of 240 months and an interest rate of 10%.