When is rented house your choice?
The argument about renting a house or purchasing one turns out to be foolish. The mindset of the people in the developing countries like India would always ask them to secure their retired life which can only happen by purchasing a home with the help of the home loan. The argument rather should be about when to buy a home with the help of housing loan and when to live in the rented house?. Investing in the purchase of the home is the biggest financial decision in the Indian economy and one needs to invest their lifetime savings to fetch one, so the decision should be made carefully.
Decide Between Purchasing and Renting a Home
All banks today sanction 80% of the price of the property towards the home finance irrespective of your good credit score and repayment capacity. The difference amount has to be paid by the borrower and is termed as margin money. A person who has started their career recently many find it difficult to save such a huge amount and rented house becomes your option over purchasing one.
If you are not sure about the locality that you are going to live and are on frequent transfers as a part of your job responsibility, it is wise to rent a house rather than buying it. On the contrary, if you already taken a decision to purchase a home and are unsure about locality, rent a house in the locality in which you have decided to own a home to familiarise experience before you make a commitment.
When buying a home is a wise decision?
It is always a good idea to purchase a home with the help of the home loan if you are able o fund the margin money as stated above. Apart from this, you should also check if you can afford to pay monthly instalments of your home loan comfortably with your current income before making a commitment.
Cost-benefit analysis is another important factor that one should consider while purchasing the house. Rented house needs to pay somewhere between 2% to 4% of capital value whereas buying a home will cost you 10% for home loans. One should also take into account other tangible and intangible benefits that will be added to your pocket on purchasing a house with the help of housing loan.
Never wait for correction of prices when you want to buy your first home. There has 9% rise in the value of the property during last five years. People who have delayed their first time home purchase with the hope of price reduction in the property value probably has missed a good one. You should also consider the appreciation of the property over a period of time while making a cost-benefit analysis.