Why choose EMIs over monthly rentals Latest News

The constant debate between benefits of buying and renting never ceases. While renting may be a wise decision for short durations, EMIs are the choice for those focused on future benefits. This Independence Day, free yourself from the burden of rent and enjoy a sense of ownership.

A number of people, who come to the city to make a living, often spend a major chunk of their salary on monthly rent. And it doesn’t end there; the hassle of moving homes often adds to the expense – not to mention the yearly deposit. And after all that trouble, they neither have a house to call home nor land as asset.

The early bird gets better EMIs

Millennials who have learnt to strike a balance between the traditional and modern way of living, those who live independently and yet have a certain sense of belonging and responsibility now understand why buying rather than renting is the smart way to go.

A home starts appreciating as soon as you buy it; better returns and a place to call your own are among the many perks of buying a home.

The decision to buy or rent is influenced by factors such as property prices and potential appreciation, annual income, job stability, prevailing rental yields, tax benefits and other investment opportunities and lifestyle.

Rajan Pental, group president and head - branch and retail banking at Yes Bank, says, “Buying a house is beneficial if an individual plans on living in a particular city for a longer duration, whereas renting is a better option for a short-term stay. It is recommended that you buy a house at an early stage in life rather than postpone it. This will help the owner manage expenses effectively since the EMIs become manageable as income increases.” Anuja Sathe, assistant general manager, capital markets & investment services (Pune) at Colliers International India, tells us why it is a S-M-A-R-T choice to buy a house instead of renting:

SAVINGS help you – lower your savings your EMIs can and save money monthly. If you have sufficient savings, then opting to make an upfront payment is wise. This helps lower your EMI. Income tax deductions can be claimed on the interest and principal paid on housing loans results in tax savings as well.

MARKET and purchase – Study property the market where prices are expected to rise. You can take into account the infrastructural development, connectivity and upcoming projects in the area to determine the price appreciation.

ASSET CREATION property – on By EMIs pur- , chasing you create a long-term capital asset by utilising finances in a disciplined manner as opposed to rental payment, which would not result in creation of any asset. It would only serve as an outflow. Buying a house gives the owner a sense of ownership and pride as well as the option to raise finances on the property in case of financial distress once the mortgage is paid.

RIGHT PRICE – Ensure that the property you are buying is at the right rate. Do your research to ensure it is not overpriced. Currently, with lower housing loan interest rates and affordable housing schemes being announced by the government, buying homes on EMIs has become a reality for many.

TIME– Over a remain period, EMI would constant depending on the type of home loan as against rentals, which have an annual incremental clause. Also, the salary/income of the individual is also expected to increase on an annual basis and the EMIs would slowly become a small portion of the income of the individual.

GOLDEN RULES OF EMIs:

Never let your EMI amount exceed 40-45 percent of your monthly income;

Schedule your EMIs closer to your salary date so that there is no delay in repayment;

In case of surplus funds, opt for a higher EMI or prepayment of your home loan to reduce the principal outstanding, thus saving on the interest amount and reducing the EMI amount and loan tenure;

Plan your expenses with the remaining funds after your EMI payment.