Buying a house for the first time is the biggest challenge for monthly salaried professionals. The final decision on home finance should be taken more cautiously because a single wrong step can put you into huge debt.
Consider the steps before buying vs renting a home:
Returns on investment:
Return on investment is considered if there is an investment into the real estate market or the amount is deposited into respected banks. Please find out some of the tools to figure out the things:
(a)Price to rent calculator:
price to-rent calculator is the best tool that is used by US people to calculate the price ratio of buying or renting a home in the US. The formula is dividing the total cost of a house by the annual rent of a home. If the outcome is below 15 then it is good to buy a home or else the renting option is good to go with.
(b)Risk analysis: It is always seen an aggressive price rise in the real estate market in every state of India. Because In India property price kept on high for a longer period. But the scenario is different in rental income, a rise in rental price exists but it grows at a realistic value because the rental option is a true function of the demand of the market. The most rental agreement has a 10 percent annual hike clause. But property rates generally more than double every 2 to 5 years in metro cities. Even the stock market can give you a good 20 percent excess return on investment. So it is good to figure out a Risk analysis before buying a new home.
Figure out cost-benefit analysis:
Use web calculators that are available free of charge to track cost-benefit analysis by including several tax benefits and investment approaches.
Financial strength:
Financial status is a strong guide that reflects the decision to finance a home. All of it depends on the monthly income. If someone has a salary of around 1 lakh per month then he is eligible to acquire a 40 lakh to 50 lakh home loan on his income credential. However, the monthly expense should be less than your salary minus the EMI of the home loan towards home finance.
That is not over. One needs to put a 20 percent upfront price for the booked house. If 50 lakh is the total cost of the flat then 10 lakh is the upfront price for the flat. Ideally one has to put some contingency amount of salary aside. The saved fund after paying monthly EMI and expenditure will help to cover any investment needs and immediate increase in interest rates. If these conditions are fulfilled then it’s good to with buy option else opt for the rental option.
Income stability:
Home loans are for a longer period of more than 20 years. Without a thorough check of buyers’ income credentials, banks do not approve any home loan. So prospective buyers should have income stability. A home loan agreement for private sector employees inbuilt with 3-month EMI cover insurance. Also before sanctioning of home loan one should take into account of annual salary hike for the next upcoming years because the monthly home EMI may increase if rates go up. If the employment possibility is not strong then it’s better to go with the Rent option.
Understand the economy:
It is not easy to predict about economic cycle. So look around once when there is a rise in the job market and stock markets are performing well. Equities are the leading factor for the economy. Also, a close watch on the loan interest rate cycle because it is an uncertain factor in EMI. If there is any uncertainty about the economy then it’s better to choose rental accommodation.
Ease of replacement:
Due to huge capital investments. It is very difficult to change a purchased home. So it is good to do smart investments considering areas with the best basic infrastructure. Better road connectivity, social infrastructures, gardens, etc are the value-added factors to the property. It is good to go with the rental option rather than buying a home with a low budget and no infrastructure.
Conclusion:
Hope you understood the best option that suits your living. The piece of content will elaborate on the things regarding buying or renting a home in India. Feel free to call us to find out the best home in your nearby locality. We will help you at the best.
