Owning a home may be great proposition and exciting too. All your investment is worth it as you accumulate a great asset whose value increases over time along with its income-generating potential through rental income. Rental income can make the cost of capital lesser and is a source of great income even when one’s potential to earn dwindles. Although the rentals may be cheaper than the EMI’s of the home in the short run but in the long run, the total rental payments are much higher than the cost of a similar property. Over and above that, the rental costs incurred cannot be recovered with the uncertainty as a usual part of the game as the owner can ask for vacating the property at any time. This is not all. There are other advantages of an owned property too. An owned property can be mortgaged with the potential of generating lump sum cash which is not possible for a rented property and all the rent is paid in vain which is irrecoverable.
Notwithstanding all these benefits of owning a home, it is not easy, as it requires the payment of huge EMIs that may cut into the cost of living, education expenses of children or other essential family expenditure. The best strategy is to own a house at the early stages of life when the income is lesser with the hopes of larger income in the future which would increase the savings. Usually, after five or ten years when the salaries would increase, the EMIs would still remain the same making it proportionately lower than the total income. With the property prices appreciating, the total asset of the individual as well as the income would increase simultaneously. Although this strategy looks fabulous, but in life, planning often fails as there are contingencies, commitments, and unforeseen events. This makes renting inevitable and owning a home becomes a dream for many. The question is how would you decide to buy a home and when would one do so?
Should you rent?
Owning a house may seem to secure a future not for you alone but for your family too, but renting is much easier which gives you ample flexibility as well. If you are in the early stages of your career and working in the upcoming metropolis of the country like Bangalore or Gurgaon, renting may be much easier. If you are not sure of where you would land up in pursuing your career, buying a home may not be a judicious decision. Apart from that you always have the flexibility to change to a better and bigger house as and when required. It becomes much easier to move to other cities or shift to a smaller house when the children get older and shift to different cities or homes. Although, renting may be advantageous in the early stages of one’s career but it may not prove to be a great and cost-effective solution in the long run. It always proves profitable to own a home if you stay for a longer period of time.
Take the right decision at the right time
Owning a home may be lucrative but the decision should be made in sync with one’s life’s conditions, preferences, and in tune with the income. If you have plans to live in that particular area or town for at least five to eight years, your decision to buy a home can be justified. The next factor is the income which should be stable and those working in a sector with frequent layoffs should try to avoid this huge liability. Even if the income from any source may be unstable, you should look into other sources of income for you to pay the EMIs in time if you decide to buy a home. Again, if you have the affordability your liabilities which are all your loans taken together should not exceed 40% of your net income.
Albeit, you would go for bank financing for buying a home, you would still need to pay at least 20% of the price of the home as down payment which you also need to arrange as well. You should also take the decision when the market prices are low with a promise of appreciating property prices which would fetch you the ROI advantage. Considering all these important factors, should you think of buying a home and most importantly the time for your home buying.