We all reach a point in our lives when we decide about our future homes. When some people have set goals in their mind about owning a new apartment, villa or an independent house in prime locations some others feel it’s a better idea to rent affordable homes in a locality they prefer to move into. The option of having to choose whether you want to invest in a home you can call your own or rent a comfortable villa or apartment is always difficult, especially when the former and the latter come with their respective pros and cons. While sky rocketing property prices and differing rental rates often leave customers confused, there are various other personal and financial factors that will help shape your decision between owning a 2 BHK/ 3 BHK apartment or home, and renting one.
When to consider buying over renting?
Experts often consider buying a home as a wiser option in the early stages of one’s career, especially if you have a commitment to settle in a particular city or place for long term. Even though the hurdles of managing the monthly EMIs may seem difficult in the beginning, a few years down the line, when your salary would have increased and the rate of EMI will relatively be a small portion of your salary. Since buying a home is a long term commitment, it is extremely important to consider if you have the necessary funds for the down payment for buying a home as it can amount up to 15-20% of the total cost of the house and to ensure a stable cash flow to put towards such an expensive investment.
Why owning a home may be a better choice?
- The sense of freedom, security and pride that your own home holds, whether it is a luxurious 3BHK apartment or a cozy 2 BHK house, it cannot be compared to a rented house with restrictions hidden in every nook and corner. Your own home comes with the freedom to design, remodel, and furnish it the way you please, reflecting your identity.
- Renting a 2 BHK apartment may seem like a cheaper option for a short period of time as compared to the EMI for a home loan, but in the long run, rental costs will be way higher than the original cost of the house.
- One of the largest benefits of buying a home is the high rate of value appreciation that comes with it. While not the value of all homes rise and fall at the same time, property values are have always kept up with inflation and the combination your equity build up and appreciation value of your home will set you on the track for immense wealth creation.
- Be it an apartment in a prime location or a villa in a calm and quiet locale, owning a home will help you generate additional income, in the form of rentals or from paying guests.
- A house owner is always free from the risk of increasing rentals and unnecessary interferences, ensuring privacy and stability of a home you wouldn’t have to move out of.
- A home owner can mortgage the property but a rental property cannot be mortgaged by a tenant.
- Owning a home or apartment will let you attain great benefits from the income tax deductions.
- When you decide to finance your brand new apartment or a villa through a loan, you are already aware of the EMI required to be paid and this makes the future costs to be incurred, more predictable and stable.
Disadvantages of owning a home
- From a studio apartment to a luxurious water-front apartment or villa, a home needs the same amount of maintenance and requires the owner to take the sole responsibility of all the repairs and damages incurred.
- There are chances that the value of the house or apartment that you purchased may not increase, especially during the first few years.
- While buying a new apartment, villa or independent house, the initial down payment can be extremely costly in addition to extra expenses for closing and moving.
- House owners may in certain cases be prone to risks of being unable to pay taxes, mortgages and even afford costly repairs. Possibility of increase in property taxes and even foreclosure poses a threat to many people.
When to consider renting over buying?
When ownership comes with its own advantages of stability, another aspect that only rented homes can provide is a sense of great financial and physical flexibility. If you have relocated to a particular city where you don’t plan to settle down, renting a house or apartment is the best choice to make. Your decision to choose a rented apartment or villa will also largely depend on the size of your family and their preference of location. When people have already decided to buy a house, but are unsure about the new location, you could take a house on lease in that locality to experience the stay, before making a final commitment. If the rent in the area you wish to move into is lower than average and is expected it to stay that way, the best option is to always rent.
Why renting a home may be a better choice?
- Renting a home for a short term could be cheaper than buying a home, as renting doesn’t require you to pay up a lump sum down payment.
- Flexibility becomes a key advantage when you decide to rent an apartment, house or villa, especially if your job requires you to relocate frequently.
- While renting a 2 BHK apartment or a luxurious house, all the maintenance cost and repair work are to be borne by the landlord.
- Most leases are valid for 12 months and one of the major advantages of renting a home is that there are no long-term financial commitments involved.
Disadvantages of renting a home
- One of the major financial disadvantages of renting an apartment or a house is that you won’t be able to claim any deduction for mortgage interest and property taxes while filing your tax returns.
- Rental rates in different parts of the city may vary. For e.g. Apartments located near the Technopark in Trivandrum or the Infopark in Kochi will be a lot higher than rentals in the interior parts of the city.
- Rentals for apartments or homes are not fixed and are likely to be raised annually.
- The entire structure of your rented flat or villa will be designed and remodeled by the landlord according to their tastes and preferences.
- Renting an apartment or house brings no return on investment and is an expense that will be incurred every month.
Buying a home or an apartment can come with an endless list of tangible and intangible benefits and drawbacks, just like in the case of renting a home. Arriving at an appropriate decision between renting and owning a home is totally dependent on how long you plan to stay in the particular location and your financial stability. Affordability must be given prior importance as the combined EMI on all your loans (house, car, personal, etc.) should not exceed 40% of your take-home salary. Whatever may be your decision, always ensure that you associate with trusted builders like Kalyan Developers so that even if you are renting or buying a 2 BHK/ 3 BHK apartment the decision you make will only prove to be advantageous with regard to the incomparable lifestyle these homes offer.