A listener on Pravasvani Sham Ka Safar program, aired on KLOK 1170 am, asked whether one should buy or rent the house.
The answer is a very personal thing and the best course of action may be based on financial, emotional, and personal factors. So let us look at the personal or emotional aspects.
Owning a home provides a place which you and your family call a home. It is a sign of stability which is cherished by the family throughout the life. Kids always remember the house they grew up in as their home throughout their life. Owning a home means you are not subject to landlords whims who may decide not to renew the lease and you are forced to move. If the move is local, kids may not have to change the school. Or the move may be slightly long distance, in which case kids have to change school, make new friends, get adjusted to new environment etc.
Owning a home provides a place which you and your family call a home. It is a sign of stability which is cherished by the family throughout the life. Kids always remember the house they grew up in as their home throughout their life. Owning a home means you are not subject to landlords whims who may decide not to renew the lease and you are forced to move. If the move is local, kids may not have to change the school. Or the move may be slightly long distance, in which case kids have to change school, make new friends, get adjusted to new environment etc.
The financial aspect is simpler to address. If you are planning to stay at one place over a long period of time, then owning a home definitely makes financial sense in any market. Historically, owning real estate has been on average the highest source of appreciation. Many wealthiest people in America own their fortunes to real estate investments. All the landlords provide rental units not because of the goodness of the heart but because it is the safest source of investments.
There is a practical aspect to the home ownership. One should have sufficient income, stability, and reserves to afford mortgage payments, property taxes, insurance, home improvements, utilities etc. Typical rule of thumb is that total housing related expenses should be about 1/3 of gross income. Buying home by stretching your expenses beyond your income has led to the current crisis. The days of using house prices as an ATM are gone. There is no doubt that if one can afford to purchase a home and keep it for a long term period, then ownership benefits will outweigh rental benefits.
There is a practical aspect to the home ownership. One should have sufficient income, stability, and reserves to afford mortgage payments, property taxes, insurance, home improvements, utilities etc. Typical rule of thumb is that total housing related expenses should be about 1/3 of gross income. Buying home by stretching your expenses beyond your income has led to the current crisis. The days of using house prices as an ATM are gone. There is no doubt that if one can afford to purchase a home and keep it for a long term period, then ownership benefits will outweigh rental benefits.
The situation for a short term is not clear and varies from place to place and your time horizon. There are many financial calculators which allow one to compare the cost of renting a home vs the cost of owning a home. One such calculator link is given below-
http://realestate.yahoo.com/calculators/rent_vs_own.html
Considering todays low market values and low interest rates, buying a home will be financially better than renting it for many people and in many markets.
Considering todays low market values and low interest rates, buying a home will be financially better than renting it for many people and in many markets.
