Rent versus buying a home:

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First time property buyers face the dilemma of whether it would be more prudent for them to buy property or continue living on rent. Indeed it is cheaper to rent a house for a lesser amount than the EMI. You could invest this difference between the rent you pay and the EMI, let it grow and later on buy a house. On the link below is a calculator that allows you to compare the two options and see which one is beneficial for you.





For most young couples buying a house will always be the better of the two options even if it means paying EMIs over long periods of time. The benefits of owning your home are

-You are investing in a growing asset

-Your income will eventually increase and accommodate the EMIs far more easily than they appear to in the beginning of the loan period

-Finding new apartments to rent every two to three years is time consuming .The inconvenience caused to family specially when there are young children and when both spouses are working, needs to be considered.

-Rents will rise every other year and eventually there will be little difference between EMI and rent.

-There are a lot of emotional considerations for buying your own house and that takes precedence over the financial ones especially when it comes to your first home.

Renting is a good option in the following scenarios

-You have been posted in a city other than that of your permanent residence for work reasons and don't intend to live there for long.

-Your rented place offers you a very tangible benefit. For example saving in commuting time and hence better productivity at work or networking. If living in an location where u cannot buy but only rent, offers you a chance to grow your business or move up in your career then you might as well ignore the financial costs of renting. After your entire career is a far better and bigger investment than any other.

If you fall into the must rent category I suggest you could still consider buying a first home. Such property could be in a cheaper location or of a smaller size. You could even rent out this property, thus creating an alternate income stream.

Some financial dos and don'ts when buying your first home

Do not take personal loans or take a loan against insurance policies/stocks etc, fund the stamp duty/down payment and cost of doing up the home interiors. Save for these in a planned manner. Buy a home that fits your budget and loan paying capacity. Over leverage will only cause damage to your peace of mind and ability to service these debts

Do not exhaust your emergency fund- you must have three to six months expenses and EMIs in a bank FD and liquid mutual fund

Do buy adequate life, medical and critical illness cover while taking a loan

Use bonuses, increments to prepay loan. Even paying two extra EMIs a year will bring down the tenure of a 20 year loan to 13 years. Your priority should be to repay the loan before committing to long term savings

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