Renting Vs. Buying a House – Pros and Cons
It is always a difficult decision to make: whether to continue to rent a house or to buy one. It is also true that with the heavy costs that are incurred when buying a home, a majority of young people start off their lives by renting premises. Along with their lives, people save money when they build their careers and buy their own homes. This is the general pattern that is seen.
Deciding whether to buy a home and when to buy it is a personal choice. However, in India, homeownership is influenced to a large extent by financial concerns, emotional and societal pressures. Read on to know the renting vs buying a house pros and cons and what makes more financial sense.
Renting a home – Advantages
#1: There is a little more flexibility in that it is easier for those that face relocation because of their jobs. There is no long-term commitment and is therefore suitable.
#2: You can live in a rented property in a locality where you cannot afford to purchase a home.
#3: Moving out is easier as responsibilities are less.
#4: The maintenance responsibility belongs to the owner.
#5: The insurance that the renter has to take is limited to comprehensive insurance to take care of the content in the house.
#6: A renter may have some money left at the end of the month that can be saved towards buying property.
#7: Renting allows for diversification of investments. Owning a house means putting all your money into one large investment with none left for the others. This also helps to spread the risks.
#8: Some utility charges may be included in the rent.
Renting a home – Disadvantages
#1: There is only limited freedom for the renter in terms of enjoying or using the property to the fullest.
#2: The renter cannot make any changes to the property without the consent of the owner.
#3: There is no option to create wealth and return on investment. He ends up paying the homeowner’s loan.
#4: There is no control over fluctuations of rent due to inflation.
#5: There is no surety that the rental agreement will be renewed on its expiry.
#6: When the renter hits the retirement stage, and the incomes taper off, it may become difficult to find big sums to pay the rent. Rent increases also become difficult to meet.
#7: There are no forced savings for the renter. There is always a temptation to spend extra cash rather than save. Paying off towards a loan helps to build equity over time.
Buying a House – Advantages
#1: It is a means to increase personal wealth.
#2: The value of the owned property will increase over time and the owner can make a profit if they decide to sell it later in time.
#3: Buying property allows the owner to completely use and enjoy the property without any restriction.
#4: The owner has the freedom to alter the property according to choice.
#5: The owner can generate income from the property by renting it out. This can be used to pay off the loan taken for the purchase.
#6: Repayments of the loan on time help to improve the credit profile of the owner.
#7: There is an opportunity to save money for the longer term.
Buying a House – Disadvantages
#1: Becoming an owner means a great financial commitment including repayments towards the house and its maintenance.
#2: Taxes and insurance are additional costs that a homeowner has to bear.
#3: A homeowner may not make a profit out of a resale of the property because of recession.
#4: A homeowner has less liberty to move out the present home than a renter.
#5: There is a down payment to be made. The buyer has to keep on making the money required for the mortgage payments.
#6: The buyer has to set up an emergency fund for repairs as and when they may occur.
#7: Many of the homes sold are not furnished even if it is a resale.
Thus it is seen that there are pros and cons to either renting out a place to live in or owning a home. There are many people that buy homes when they would be better off if they stayed for rent because owning a home means a growing investment for them. There are others that stay in rented premises for the flexibility it offers even though their net worth would increase if they purchased their own property.
When weighing the 'renting vs buying a house pros and cons', the question that arises is buying a house a solid investment. It has also been found out that an average individual changes their mind whether to rent a home or purchase one in every 5 to 7 years. Ultimately the votes are for buying a house.
With the many incentives that the government has announced for its people, it seems that the young people wanting to set up their lives prefer to buy property rather than rent living spaces. Young professionals seem to buy property for self-occupancy. Many in this category are ready to buy a home because of an increase in purchasing power. With affordable housing being the latest trend in the country, many buyers are opting to own regular apartments with basic amenities.
The bias turns towards buying a house because real estate translates to the actual illiquid asset. With a chance to build equity and boost its value over time, enjoy tax benefits, make your home into a source of income, and make inroads into the local community life, it pays to take the leap of faith and buy your own home to build more structure into your family and social life. The intangibles include the pride of ownership and a sense of stability.
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