One always thinks that owning a home is the best option. But at times renting has an upper hand as it can economically help you and help you save on your cash. It is you who can see through the situation and then work out a plan that suits you and your pocket before you decide anything.
At one point or the other everyone in his or her life faces this question as to whether go for a rented accommodation or by his own dream home. Some people opt for the rented abodes while others prefer to invest their money in buying a home. This is a very crucial decision and one has to consider all aspects before making the final call as there is always a possibility of things going topsy-turvey and your dream of buying a home can become the biggest nightmare of your life which might end up with financial crunches.
Advantages of Renting
- Monthly rentals – as the monthly rental installments can be planned before hand so there is no place left for uncertainties, though there is a rise in the rental rates every year but this is also not unsure.
- Legal requirements of having a rent or a lease agreement in place are important. This agreement is normally for a year or 11 months depending on the applicable legislations. But this agreement can be annulled at landlord’s will during the said tenure; there is always an uncertainty over rental places.
- Cost of moving from one rented place to another one after the lease expires.
- Emotional cost of moving from one rented house to another along with the loss of accrued property.
- Opportunity cost required in the case of rented homes is the price appreciation
- No threat engaged in the form of any changes in the real estate sector.
- Tax benefits can be availed by staying in the rented accommodation as many employers have to pay House rent allowance to the employees staying at rented houses. However, this normally offsets the tax benefit as it is counted for the interest paid out on home loan, though it may vary from one situation to another.
Advantages of Buying
- Amount involved in buying an own home can be computed and can be paid as per the expediency-no uncertainty involved if the buyers goes for the construction linked plan.
- Legal requirements include in case of new property are title deed, sale deed, stamp duty and registration agreement, in case of resale property transfer deed is also required.
- Expenses have to be borne for maintenance, utilities, renovations and other such issues including the property tax as well.
- Emotional gain as being capable enough to accumulate and contribute towards the property accrued.
- Opportunity cost incurred is in the form of cost of capital.
- Risk involved is that the real estate sector is always accompanied with a huge amount uncertainty which eventually effects that the final price appreciation of the home bought. There is also a financial risk involved with the rise of the interest rates of home loan in case if taken.
- Tax benefit evaluation needs to be calculated as this might vary in different situations.
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