Renting and buying a home are two separate real estate decisions that have their own benefits. While renting is fast becoming the preferred option among most young professionals, buying a home still offers stability in the long run.
In this blog, we’re helping you make an informed decision between renting and buying a flat with the help of pros and cons of each option. Whether you’re looking to buy your first home or rent a new property, this blog will help you make a better choice.
Advantages of renting a flat
- A rental flat is a cost-effective and flexible option as it doesn’t require any financial commitment.
- You don’t need to worry about costly repairs or maintenance bills, as the landlord does that.
- Walk away from a rental flat with no hassles as you wouldn’t have to mortgage the property or pay a deposit.
- And finally, rentals are easy to switch to another location as required.
Advantages of buying a flat
- Having a fixed monthly payment and no rent increases.
- Building equity in the property and having potential for capital appreciation.
- Enjoying tax benefits with deductions on mortgage interest rates and loan principal amount.
- Having more control over changes and renovations to the flat.
The costs involved in buying a property are also higher than renting, which makes buying a property a less attractive option for many.
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Things to consider when making your decision
If you’re thinking of buying a new flat, there are many factors to consider, the type that best suits your lifestyle and budget because finances are the top priority. Based on your requirements, you can choose between buying a new home or renting an apartment. If you’re buying a home, you can go for a newly built property with modern amenities.
You must also consider the location of the property as this will impact on both convenience and value of the property.
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Cost comparison between renting and buying a flat
- Consider the total cost of renting versus buying a flat. When comparing the two costs, it is important to consider the upfront payment of rent and the down payment required for buying a property. The down payment may vary depending on the property type and mortgage rate of interest. In addition, mortgage interest and principal amount are added to the loan amounts over time.
- Additionally, mortgage payments must be made monthly, which includes loan interest. When buying a property, mortgage interest is only paid after the property is purchased and mortgage principal is not paid back in full.
- Renting a property offers flexibility in terms of location as one can move any time without paying extra fees. Also, rental payments are easy to track with rental payment plans being widely available. On the other hand, buying a home requires mortgage payments that can become expensive if the homeowner is unable to make the mortgage payments.
- Consider tax implications of both renting and buying a home
- Renting offers tax deductions on housing expenses whereas buying a home results in tax benefits only when you sell the property at a profit. To know more about renting vs buying homes, consider all factors in your decision.
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Important factors to consider when comparing the two options
Renting and buying are both popular housing options, but there are a few factors to consider before making a choice.
Cost: If you’re looking to save upfront costs, renting is the obvious winner. Buying property requires a down payment of 20-30%, mortgage loan interest rates, property tax, maintenance costs, etc. Besides, you’ll also incur the cost of property insurance. The upfront costs of owning property can be much higher than the monthly costs of renting it.
Flexibility: If you’re planning to stay for a long time in the house, owning property is the best option as you have complete access to it. On the other hand, renting a home means dealing with a landlord who may restrict your movement or access to amenities and services. Plus, you’ll have to bear the cost of maintenance if you choose not to own the home yourself.
Maintenance: Another factor to consider is repairs and upkeep costs of owning property. Owning a home generally entails more expense on repairs and upkeep when compared to renting properties. With time, owning the house comes with depreciation costs which can become quite substantial when compared to rental expenses
Tax implications: When it comes to tax benefits of owning property, mortgage interest deduction and capital gains tax benefit should be given due consideration.
What are the long-term benefits & drawbacks of both options?
- Renting a Flat
Renting a flat has the advantage of cost-effective housing finance.
Buying a property is a long-term investment, where you can lock in the price of the home.
Renting can be cheaper than buying if you’re renting for a long time period.
Renting costs you monthly payment instead of mortgage payment. The down payment required for buying can be a burden to most of the buyers, who prefer rental over buying.
- Buying a Flat
Buying a flat entails higher initial cost and mortgage term, which can be burdensome for many homeownership aspirants. Thus renting is cost effective for them too.
If you buy an apartment, it grants you the independence to make any changes you see fit to the property. However, you won’t have this freedom and security when you rent.
When you buy a flat instead of renting, you gain full legal control over the property. Therefore, the decision-makers should weigh the pros and cons of renting carefully.
Financial Implications
Financial implications of each option are similar, but buying a flat is considered to be more expensive than renting since mortgage interest rate is higher when buying a home loan rather than renting mortgage loan interest rate. You also need to pay down payment, mortgage loan installment and property tax when owning a home while rental payment includes only property tax payment in most of the cases.
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