1. Many home loan takers go overboard, ignoring their other loans and life goals, in pursuit of a home, eventually landing in a debt trap.
2. That's why in such cases, renting can be a better option than buying property, especially in metros, at the beginning of your career when you are unsure of the city you want to settle in.
3. This, however, is assuming that you are not paying an exorbitant rent (more than 25% of your take-home salary).
4. Instead of locking funds in a house which you don't need immediately, you could invest them to build a corpus for it when you finally decide to buy.
5. Another reason for staying on rent is that an affordable house in the city where you presently work may be small or far, not suiting your current living needs.
6. If difference between rental yield (rent as % of price you would pay for the house) and home loan interest rate is more than 5-6%, postpone buying.
7. If property prices are rising, the capital appreciation of the house you buy can make up for low rent yields, but if they are stabilising, higher future prices won’t compensate for low yield.
8. If the price of the house is over 25 times the annual rent that you would pay, stay as a tenant for some more time, especially if property prices are likely to stabilise or go down.
9. If more than 80% of the EMI goes into servicing the interest component of your loan, don’t buy, and wait for the interest rates to fall before buying.
10.
If the house costs more than twice your annual
household income, chances are you can’t afford it and you would be better off
on rent till the situation changes.
2. That's why in such cases, renting can be a better option than buying property, especially in metros, at the beginning of your career when you are unsure of the city you want to settle in.
3. This, however, is assuming that you are not paying an exorbitant rent (more than 25% of your take-home salary).
4. Instead of locking funds in a house which you don't need immediately, you could invest them to build a corpus for it when you finally decide to buy.
5. Another reason for staying on rent is that an affordable house in the city where you presently work may be small or far, not suiting your current living needs.
6. If difference between rental yield (rent as % of price you would pay for the house) and home loan interest rate is more than 5-6%, postpone buying.
7. If property prices are rising, the capital appreciation of the house you buy can make up for low rent yields, but if they are stabilising, higher future prices won’t compensate for low yield.
8. If the price of the house is over 25 times the annual rent that you would pay, stay as a tenant for some more time, especially if property prices are likely to stabilise or go down.
9. If more than 80% of the EMI goes into servicing the interest component of your loan, don’t buy, and wait for the interest rates to fall before buying.
10. If the house costs more than twice your annual household income, chances are you can’t afford it and you would be better off on rent till the situation changes.