Owning a house, what's the appeal?
Asking from people who consider that one should strive towards owning a house (or an even stronger stance that not owning a house is not an option for them). Really want to understand their POV. Why are you comfortable taking 15-20 year loans for the dream of owning a house?
DaringTrain
Stealth
4 months ago
Would love to understand your perspective
I feel “house” Is a major investment and decision should be made basis individual parameters. For some people, this decision is accelerated by parents as they see “House-as-an-Investment” or a tax saving tool. Both of the things aren’t valid anymore. My framework for acquiring a house/real estate is -
1. Gather 20% of total cost, wait till you don’t have that. A 10% EMI cushion in emergency funds is optional
2. Give other life events (higher education, marriage, family) a priority over rush to buy a house. All those things might need a relocation and can impact the house buying theory
3. Learn more about different asset classes, many people I see/feel go for buying the house as it is very agent driven investment process.
4. Establish some stability in career before taking any significantly longer loan commitments
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Till 40s it could be fine. Can't live on rent in 50s. Then will be too old to move out every 3/4 years as landlords don't want to keep same tenant for a long time.
DaringTrain
Stealth
4 months ago
I would say it's the opposite, no. When you are in your 50s, your children have moved on to higher studies and different geographies. So, it's easier to shift as a couple.
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If you are sure you want to stay for long time at your current place then owning a house is better, else no.
DaringTrain
Stealth
4 months ago
When you say current place, do you mean job or location?
I am married and living with my parents in Bangalore. I wanted to shift to a gated society. As I required at least 2bhk to adjust with 4 people so I started searching online. My area of search was bellandur and sarjapura. I was really surprised to see that most of the flats cost me 30k to 45k as rent and at least asking 2 to 3.5 lakh as deposit. So I decided to look out to buy a resale flat. It was costing me around 75lakh with built-up area as 1205sqft. Counting registration and other expenditures like painting, wood work cost me another 10lakh. I had a saving of around 35 lakh. So used 25 to pay a down payment and then took a loan of 50 lakh for 10 year. The monthly emi cost me around 30k with 22k as principal and 8k as interest. The flat is near bellandur police station. Just 300 MTR from the main road. Instead of paying a hefty amount of rent I decided to own my own house. I already plan to sell the flat after 3 to 4 years once the metro comes to my route. This will give me a better return.
DaringTrain
Stealth
4 months ago
Thanks for sharing. This is helpful!
DaringTrain
Stealth
4 months ago
Couple of questions:
50lakh home loan for 10 years, EMI comes to 62k (assuming interest of 8.75%).
Plus you would have paid 1lakh as processing fee also (apart from registration, etc)
You say that you want to sell after 3-4 years, so do you consider it to be an investment? If so, did you do excel analysis or was it more based on gut feel and the fact that you didn't want to pay such high rents (btw, 30k rent on 75lakh property is only 5% yield. And some portion goes towards maintenance and upkeep).
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