There comes a time in the life of every earning individual, when they consider whether they should buy a property to live in. The choice is not as easy as it seems.
On one hand, we have the ability to rent a house for significantly less – the difference can be invested for large life-goals, and purchases.
On the other hand, renting can be tedious, dealing with rent increases, landlords, and moving on short notice. So, how does one choose between the two?
The answer, as we know, is more complicated than one might initially think! Let’s dive in.
Renting in the Short Term
One answer is clear: if you’re only staying in a certain city, or area of a city for a short while (typically less than 5-6 years), then it’s less of a hassle, financially as well as logistically … to rent your residence.
Younger earners can use benefit of the lower cost of renting, and the ability to travel longer to work (assuming that they don’t have kids), to rent cheap, and to trade their time for savings.
While renting on the cheap, probably on the outskirts/suburbs of the big city, they can amass the required downpayment and other fees for their home purchase.
These sums can be quite substantial, and difficult to amass early on in one’s career, given a lower monthly salary. However, it becomes easier to pay the larger monthly payments that come with a home purchase as one’s salary grows.
Renting is an EXPENSE, whereas Buying is ALSO, an INVESTMENT.
Renting in the Long Term
In the long term, renting your residence can get complicated. There are multiple issues.
Constant, and sometimes unpredictable rent increases can add up, and eat up your salary when compared to the steady, predictable outflow of an EMI (Equated Monthly Instalment). Landlords may decide to sell their property, and the new owners may not want you there, or may decide to increase the rent substantially. Often neighbouring home owners don’t like renters, and can make life difficult.
It all adds up, and after moving house a few times, it can become tiresome to repeat the process again and again. Address changes on your documents, registering gas, post office, getting your bearings in the new area, finding new places to shop… It can get old.
Speaking of old! It’s infinitely harder to do these tasks when you’re getting on in age. Would you want to have to move your entire house when you’re in your 60s? No!
In my personal opinion, renting is for the young. When you reach middle age, it’s time to consider owning your own residence.
But is buying a house now the right decision, financially? There are some good ways to find out, but for me a good, financially sound Rent Vs Buy Decision Calculator is probably a good starting point.
Buying a House: A Long Term Decision
Nobody buys a house for a short duration of stay (under 5 years), just as nobody wants to rent for 20+ years. Yet, most of us live past our 60s, and need a roof over hour heads. Therefore, it is a reasonable assumption that most households would aspire to purchase a residence of their own.
Purchasing one’s own residence has a significant emotional as well as financial impact. Emotionally, it plays a significant part in creating a stable environment. One can mould it into a long-term home, make changes that they want, and customise it to one’s exact needs.
Monthly Stresses
Owning your own home gives you comfort – once it’s paid off … but while you’re still paying instalments on the mortgage loan that you took out to buy it, you’re not comfortable at all.
When you buy your home, you look for the best neighbourhood that you can afford, and buy a house that you can see yourself living in for decades.
This means that you may buy it with more space than you need right now, envisaging a growing family.
If you’re buying an individual house, you want a nice compound; if you’re buying a flat, you want good facilities…
All this adds to the purchase cost. How much of a loan can you afford, safely? Tough question to answer without some guidance.
RentVsBuyIndia.com
That’s why, today, we’re sharing links to one of the most comprehensive Rent Or Buy Calculators made for India – RentVsBuyIndia.com.
The website has 3 separate calculators.
3 Different Calculators:
The Rent Vs Buy Decision Calculator – This calculator takes into account monthly expenses such as maintenance, annual fees like taxes, insurance, moving costs for renting, and also envisages what would happen if you invest the difference in cost between paying rent and paying an EMI monthly, over the course of many years. It takes into account the appreciating value of your property, while also taking into account the growing cost of renting year by year.
Total Cost of Renting Calculator – This is an interesting one. It takes into account, the cost of renting, including annual rent increases, maintenance fees, the cost of moving (on a regular frequency). You may be surprised to see how little it may cost in the short run, and how expensive it turns out to be in the long run.
Home Loan Affordability Calculator – How much do you earn, how much do you spend monthly, and how much goes to savings and EMIs? This calculator takes all this into account, and then determines how much you can take on as a loan EMI, ensuring that you have a safety net.
Takeaways from Using the Calculators
Play around with the values in each of these calculators… You may be surprised what a small change in the annual rental increase values can do to the final outcome of the rent or buy decision! It certainly surprised me!!
Talk to us!
What about your own experiences? Leave us a comment below, and tell us where you are in your journey. Do you have a story to tell us about your renting experience? Share it! We’d love to hear from you!
