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Jun 10, 2013, 01.21 PM IST | Source: Moneycontrol.com

Buying a home? Why personal finance matters

Buying a home is perhaps the biggest life and personal finance decision to be made by a family, yet we often take that decision based on here say, emotions, past performance metrics that are thrown at us and zealous real estate developers who claim to increase the price every other day, creating a false sense of urgency and artificial demand.

The great Indian dream, owning a home, is an aspiration of almost everyone in the country. However, the impact on personal finances for going after this dream could have substantial negative down side. While, renting home is not always considered an aspiration, the positive impacts on personal finance are significant. A typical middle class family always wrestles with the thought of buying home vs. renting a home.

Be it a first time home buyer or a home buyer who is looking to move up to the next big home, factors that often influence our decisions could be unrealistic in nature. But these are prevalent among the majority of the population. Renting a home or buying it has their share of advantages and disadvantages.

Renting a home is always considered an expense in our households. While, buying a home is considered to be an investment into an asset that could provide significant returns, perhaps at levels greater than any other asset class such as equity or fixed income.

Additionally, there has always been the social pressure on the middle class to be an owner rather than a renter. Buying a home is considered, a ticket to a superior standing in the social circles. Our physiological behavior patterns give us a sense of security, when we own a home. On the other and, renting home is still considered an option for the segment of people who have not made it yet.

The decisions made on the basis of the above mentioned factors can often lead a family into a path of financial misery. The common problems we come across today include, buying a home that was out of reach, stretching finances to meet down payments, losing money in buying home too early, not preparing personal finances for the new outflows, not preparing for emergencies etc. These mistakes could have a lasting impact on the economic future of the family and hit specific and important goals such as child’s education, retirement planning, marriage of child, living a set lifestyle etc. This problem is exasperated in the section of the population which constitute the "first time home buyers", who probably aspire to move from a rented home to an own home.

Buying a home is perhaps the biggest life and personal finance decision to be made by a family, yet we often take that decision based on here say, emotions, past performance metrics that are thrown at us and zealous real estate developers who claim to increase the price every other day, creating a false sense of urgency and artificial demand.

It is essential that buying a home v/s renting a home decision be taken objectively based on the personal finances of the individual or the family, cost of buying, cost of renting, city of stay, duration of stay and willingness to move to another city. While, emotional satisfaction is important, it cannot be allowed to cloud better judgment.

ArthaYantra addressed the issue of Buy vs Rent objectively, by introducing ArthaYantra Buy vs Rent Score (ABRS). Before making a decision, know your ABRS to know the impact on your finances.

Authored by ArthaYantra.com, an integrated online personal finance company.

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Aajiwali
3000 - 5000
Ambernath
3000 - 5000
Badlapur
1000 - 3000
Bhandup (West)
11000 - 13000
Chembur (East)
15000 - 17000
Chembur (West)
11000 - 14000
Dombivali (East)
4000 - 6000
Ghatkopar
13000 - 15000
Heeranandani Gardens Estate - Powai
25000 - 30000
Hiranandani Gardens Estate - Powai
25000 - 30000
Kalyan (East)
2000 - 4000
Kalyan( West)
3000 - 5000
Karjat
1000 - 3000
Khandala
8000 - 10000
Kharegaon
5000 - 7000
King Circle
17000 - 28000
LBS Marg
12000 - 15000
Lonavala
3000 - 5000
Mulund (East)
11000 - 14000
Mulund (West)
11000 - 14000
Mumbai Nasik Highway
3000 - 6000
Powai
15000 - 17000
Senapati Bhagath Singh Road
3000 - 5000
Sion (East)
18000 - 21000
Sion (West)
17000 - 22000
Tilak Nagar
12000 - 22000
Ulhasnagar
3000 - 5000
Vikhroli
11000 - 14000
4 Bunglows
17000 - 28000
7 Bunglows
13000 - 23000
Chandivali
10000 - 15000
Malad (East)
12000 - 14000
Versova
21000 - 24000
Airoli
4000 - 8000
Belapur
6000 - 9000
Ghansoli
6000 - 8000
Kalamboli
4000 - 9000
Kamothe
4000 - 6000
Nerul
7000 - 10000
Palm Beach Road
12000 - 15000
Panvel
3000 - 6000
Sanpada
8000 - 10000
Sea Woods
8000 - 10000
Ulwe
3000 - 6000
Uran
3000 - 6000
Vashi
9000 - 12000
Altamount Road
62000 - 72000
Breach Candy
62000 - 74000
Chowpathy
48000 - 58000
Colaba
42000 - 46000
Cuffe Parade
67000 - 69000
Dadar(East)
32000 - 34000
Dadar(West)
29000 - 32000
Lower Parel
32000 - 34000
Mahalaxmi
38000 - 40000
Malabar Hills
68000 - 75000
Mumbai Central
23000 - 34000
Napean Sea Road
66000 - 74000
Parel
26000 - 34000
Prabhadevi
37000 - 39000
Tardeo
41000 - 49000
Worli
36000 - 41000
Andheri (West)
18000 - 20000
Andheri(East)
15000 - 17000
Bevarly Park
5000 - 7000
Bhayander (East)
5000 - 6000
Bhayander (West)
3000 - 5000
Boisar
1000 - 3000
Borivali (East)
11000 - 13000
Borivali (West)
10000 - 14000
Dahisar
4000 - 8000
Goregaon (East)
13000 - 17000
Goregaon (West)
12000 - 14000
Kandivali (East)
12000 - 14000
Kandiwali (West)
11000 - 12000
Malad(West)
9000 - 14000
Mira Road
5000 - 7000
Naigaon
1000 - 4000
Nala Sopara (Eastt)
3000 - 5000
Nalasopara (West)
3000 - 5000
Poonam Nagar
6000 - 8000
Shanti Nagar
7000 - 9000
Shrishti
6000 - 9000
Vasai Road
1200 - 4000
Virar
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