Home Buying Tips: Is it better to buy a house or live on rent? These 3 thumb rules will make it easier to decide..

Buying a house or living on rent, this decision is a big question for many people. Especially when you have to think about pocket, job, and lifestyle. On one hand, buying a house can be emotional; on the other hand, it is also a big financial responsibility. Therefore, this decision should be taken not just based on emotions, but after thinking carefully with the right calculations and rules.

Buy a house or live on rent? Which is better

Today, we are talking about 3 easy thumb rules that will help you decide whether it is better to buy a house or live on rent. These rules are not difficult, and we are going to understand them in a very simple way.

4% Rule: The easiest thumb rule for buying a house

According to this rule, if the annual cost of rent is more than 4% of the price of the house, then buying a house can be better. If the rent is less than 4%, then living on rent is more sensible.

For example:

If the rate of a 2BHK flat is Rs 40 lakh and you are paying Rs 15,000 per month as rent for the same flat, then the annual rent will be Rs 1.8 lakh
(1.8/40) × 100 = 4.5% i.e., it is more than 4%. In this case, buying a house can be the right decision.

2. 30% Rule: What does your pocket say?

According to this rule, you should not spend more than 30% of your monthly income on the house, whether it is rent or loan EMI, maintenance, tax, etc. If your salary is Rs 60,000, then your housing cost should not exceed Rs 18,000. With this, you will be able to do other necessary expenses and savings without any hassle.

3. 5-year rule: How long will you stay in one place?

If you are planning to stay in a city for 5 years or more, then buying a house can prove to be a good investment. This is because things like transaction costs, registration, and down payment are associated with buying and selling a house, which do not seem reasonable if you stay for a short time.

In at least 5 years, you can get enough increase in the price of that house to cover these expenses. Otherwise, it would be better to live on rent.

Is it right to take a decision only on the basis of thumb rules?

No, the decision to buy a house or live on rent should not be taken only on the basis of these rules. But these rules give you an easy calculation and information about which option is better from a financial angle. Your job stability, family planning, intention to live in the city, and other financial responsibilities also matter. But by keeping these thumb rules in mind, you can definitely take a well-thought-out decision.

If you are also confused about whether to buy a house or stay on rent, then apply the 4%, 30% and 5-year rule mentioned here on your finance today. This will not only make your decision easier, but can also turn out to be a profitable deal in the long term.

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