Buy Vs Rent – Decide How?

Renting vs. buying a house is not a binary (0,1) decision. It depends on many factors such as market conditions, your current financial situation and your personal preferences. This age old question has always been an important part of personal financial decisions.

The answer to this question can be completely different once you decide whether it’s a rational or an emotional decision as buying a house is considered a significant milestone in one’s life. 

The starting point to arrive at the answer to perhaps one of the biggest financial decision of your life is to decide the route you want to take – Is home buying a completely investment decision for you? If yes, there are many good online calculators available, which can help you, decide the most logical decision (links for good calculators given at the end).

Most of the calculators don’t take into account the additional cost like relocation, maintenance, interiors etc.

In the case your reasons for buying a home is more emotional than rational decision driven by security for family & kids. We have compiled a small questionnaire for you to answer, which will help you, determine: 

1. Are you a person/family who loves stability?
o YES
o NO

2. Are you going to spend more than 20% of the cost of the house on interiors and renovation?
 o YES
 o NO

3. Are the prices in the area moving more than inflation in last 3 years?
o YES
o NO

4. Are you having a decent savings/investment plan up to 30-40% of your current income?
 o YES
 o NO

5. Are you planning to stay at the same location for more than 10 years?
 o YES
 o NO

 6. Are you financially capable to invest the booking amount and taxes for owning the house?
 o YES
 o NO

7.Are you having the financial stability i.e. are you going to be earning at least the current income for next 5 years?
 o YES
 o NO

 8.Are you having the loan eligibility to own the house in case of home loan?
 o YES
 o NO

9. Are you financially capable to pay EMI and maintenance of the house every month?
 o YES
 o NO

If answer of most of the 9 questions above is YES than it makes better sense to buy the house.
If you have more NOs than YES it’s the time to align your financial planning to achieve the security of owning a beautiful house.

Links for Some Good Calculators: http://assetyogi.com/calculator/rent-vs-buy-calculator-india/ http://www.livemint.com/Object/ipfQL8zoXnj5AmuZCEJGsL/rentvsbuy.html

There is some additional home buying cost, which this info graphic can explain in better way.

This was our take on how, economically and cost effective you can be, while looking at personal financial factor. Individuals looking for property have to carefully analyze the pros and cons of destination to live in.