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Rent or Purchase- what works best for you

Rent or Purchase- what works best for you

While there may be no one size that fits all answer for this buy versus rent question, it is worthwhile considering these pros and cons while arriving at this rather important decision.

Advantages of Buying a home

You are making an investment for the future- With home prices on a rise, buying a home, clearly works as an investment. Even if you decide not to live in it, you can choose to rent it out and generate rental income while the market price continue to escalate.
Tax Benefits- You can avail of the tax benefits when you are paying your installments towards the loan.
You are free to do up the house as per your preference- Unlike a rented accommodation, you can do up an owned house as you like.
Disadvantages of buying a house

Your assets are no longer liquid- Having put your savings in buying a house your assets have been rendered non liquid
You need to spend on maintenance – Having bought a house you still need to invest in maintaining it.
Pay Property Tax- Being a house owner comes not just with a one time expense but also with other recurring expenses like paying property tax.
Advantages of Renting

You are not locking in your liquid assets- The biggest advantage of renting is that you are not locking in your assets. As such when your career or personal life demands you to move, you can do it without being tied down.
No maintenance- If there is a leaky pipe or seepage in the wall, you can happily pass on the complaint to the owner.
Disadvantages of Renting

You are not building an asset- While you are making monthly payments, they are going towards providing you a place to live, not towards building an asset.
You need the owner’s approval- Should you want to do any changes in the house- repaint it, remodel it, you need to get the owner’s approval.
Cost escalation- With rents on the rise, each time your lease ends, you could be in for a cost escalation.
It is important to go through all the above pros & cons before arriving at any decision to rent or buy. Other than these, your decision to rent or buy, is also influenced by factors that are specific to your particular situation, namely:

Your financial position- Some of the factors that determine your financial ability to buy include

Your income

Credit rating

Debt-to-Income Ratio

Mortgage Qualification

Plans for the future- These include areas such as do you intend to live in the city for long, if there is likely to be any increase in the family in the near future and other such factors.
It is clear that you need to take the time to come to this rather important decision of rent versus buying that works for you not just in the short term but also at least in the medium term.

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