[SmartCat]

Originally Posted by DigitalOne

Nice sounding words, but not practical advice. What does 'own' mean? Till the time you are paying the mortgage, the lender holds a lien on your property. They can evict you and auction your property if you stop the EMI.

There is a phrase not very well known in India called HOME EQUITY.
https://www.investopedia.com/terms/h/home_equity.asp

Home equity is the value of a homeowner’s financial interest in their home. In other words, it is the actual property’s current market value less any liens that are attached to that property.

So if current value of a property is Rs. 1 cr, you probably own Rs. 20L in the beginning. Over time, as you pay along the principal and the interest, your share of the property gets closer to the market value.

[DigitalOne]

Originally Posted by V.Narayan

Ouch! Ouch! Permit me to differ. .... We shall cheerfully agree to disagree.

All I am saying is that you don't 'own' a thing, if you do not have a right to sell it. Till the time the mortgage is paid off, and you have the original registered sale deed, you can't sell the property. A public sector bank lender may not go to extreme of evictions, but can you be sure that a private sector lender won't?

Originally Posted by SmartCat

There is phrase not very well known in India called HOME EQUITY.

Thanks! Genuinely trying to understand here. If the borrower stops paying the mortgage, the bank has the right to sell the property, and bank then pays the borrower part of the proceeds, right?

[torque789]

Originally Posted by DigitalOne

All I am saying is that you don't 'own' a thing, if you do not have a right to sell it. Till the time the mortgage is paid off, and you have the original registered sale deed, you can't sell the property.

I guess this is not right. You can sell your house which is on loan, payoff the outstanding and then transfer the ownership to new buyer. You definitely have the rights to sell, even if there is an outstanding loan with the lender.

[reverse_gear]

Originally Posted by DigitalOne

All I am saying is that you don't 'own' a thing, if you do not have a right to sell it. Till the time the mortgage is paid off, and you have the original registered sale deed, you can't sell the property. A public sector bank lender may not go to extreme of evictions, but can you be sure that a private sector lender won't?

Technically, you have the right to sell off the house as long as the lenders are being paid off in full from the sale proceeds. Lender has an obligation to release the original property papers when the loan is fully paid off. This would be the same whether it is public or private sector bank. You have to repay the loan fully as part of the property sale proceeds, otherwise they will not release the mortgage.

Originally Posted by DigitalOne

If the borrower stops paying the mortgage, the bank has the right to sell the property, and bank then pays the borrower part of the proceeds, right?

Technically the lender will invoke the mortgage and take over the property. And yes, he has the right to sell the property to recover the loan amount outstanding and the balance amount (if any) will go to the borrower.

[SmartCat]

Originally Posted by DigitalOne

Thanks! Genuinely trying to understand here. If the borrower stops paying the mortgage, the bank has the right to sell the property, and bank then pays the borrower part of the proceeds, right?

Yes, banks regularly auction off properties when customer is unable to pay EMIs. Google "<BANKNAME> property auction". Eg: https://www.hdfc.com/auction-properties

If a customer's property goes for an auction, he is guaranteed to get a very bad deal:

- It will be an auction with a reserve price
- Only when great auction deals are available, property investors will line up & participate in auctions. So final deal price will be lower than market price.
- Bank will only be eager to recover the (principal + interest), and are not interested in getting the market value.
- Usually there is lot of time gap between last EMI paid and the day on which the property is sold off. The original customer has to pay 'auction fees plus penalty for skipping EMIs plus interest' and this will be deducted from auction proceeds.

[lazy]

Folks...

By no means an expert in this field, but here are my experiences and advice.

- Buy a home that you like* - if post EMI you're left with 2x your typical monthly spends (including mandatory PF/NPS etc),

* means - be willing to make some compromises with the purchase esp if its your 1st property - eg. in our case we could afford a slightly smaller apartment than we would have liked but we were adamant on main/primary road location with BMTC/volvo route, Tier1 or 2 builder, ready to move in property to eliminate risk, walking/open spaces etc. Your compromises could be different, but be willing to make some.

- Buy the biggest/prettiest house/flat you can afford - make it your own - make memories. Life is beyond excels and calculators - what's the point of earning money if you cannot spend it on something that gives you joy. This home will be your safe haven at the end of a tiring day in a typical city that is dirty dusty chaotic harsh rude crowded ugly.

With time, trade up to a bigger/better property - it'll be easier with the first property pumping in 50% or more of the new one.

cheers
lazy

[rx100]

Originally Posted by SmartCat

Yes, banks regularly auction off properties when customer is unable to pay EMIs. Google "<BANKNAME> property auction". Eg: https://www.hdfc.com/auction-properties

If a customer's property goes for an auction, he is guaranteed to get a very bad deal:

And imagine the situation like the distress selling by mortgage lenders in US during 2008 real estate bubble. In that case both customers and lenders have everything to lose.

[headbanger]

If the question is "renting vs owning" in theory, majority of folks would prefer to own it. There are no two ways around it.

But the key here is affordability of the properties vis a vis the current and expected future cash flows of the incumbent. Taking long term loans, say 20-25 years, while being employed in private sector for properties that cost in multiples of one's current CTC forces you to assume the rosy picture for a substantial future time. One wrong turn and the thorns with the rose make their presence.

And then there is a lot of grey area in how real estate as an ecosystem works. If someone gets stuck in a shady transaction, it's a hassle that can scar you for lifetime.

Add another factor, how many folks working in say IT space know or will confirm that they will end up working in the same city for next decade.

In this aspect, renting is seen as a viable option since there is medium term predictability with no overhangs.

The point that I am making is that an average person looking out for purchasing a property has to take a lot of variables into account to take that leap of faith.

[SoumenD]

I myself have invested very early (in 20s) & am staying in the house currently but given a choice again, I would like to go renting atleast till I turn 40+ and am sure about where I want to settle.

Now am in Bangalore and having a house restricts my mobility in terms of jobs. I can't imagine picking up something in Whitefield or Manyata considering how far they are from my residence. But most offices now are over there or ORR.

[androdev]

Always been a "own house" guy - a little place on earth where I come at least 3rd in command (after wife and kids).

However things are not so simple these days. It was a lot easier to commit to building or buying a house when people could make reliable assumptions about the place where they are going to settle, the type of career prospects they would have, family/relatives who would stick around and so on. These days career growth depends a lot on mobility. Imagine buying a house but hating it because it limits your job opportunities and schooling for kids, etc. Also difficult to predict whether you will be a 25 year old billionaire or 50 year old that has been made redundant by AI. Wife, klds, extended family, etc. also can't be taken for granted these days.

Having said that, I still recommend buying a house for own use. Don't think of it as the ultimate dream house for eternity. Just think of it as a long term lease that you give it to yourself with unrestricted rights to do it up the way you want. There are very few assets that you can enjoy using without bleeding depreciation cost. Think of it as buying a nice car that doesn't depreciate! Finally when the house starts becoming a PITA (due to job change, the neighbourhood transforming into a dumpster, or you can't fit your Fortuner in the parking lot), just sell it and start all over again.

What if you really like the idea of living in your own house but find it too damn expensive to buy and the RoI is really poor to put all my eggs in one basket? Downsize! A smaller dwelling in a better community/location is better than a larger dwelling in an average community. This is a very important point to remember - our urban civic amenities are nonexistent and the cost of good quality housing is prohibitively high. The logical thing to do would be to embrace small size apartments like most of the big cities of the world. I hear people talking about going to smaller towns to retire - I would say, a studio apartment in the big city might also be a good option. Look at the bright side, you will have something common with cities like New York, Tokyo, etc. and you can get hooked to IKEA.

We no longer have the luxury of calling any place our permanent home - that doesn't mean we have to go the rental way and give up our independence and control. Owning a house, like marriage and kids, is less about finances and more about one's philosophy of life.

[Rajat347]

Personally for me, Buying is better than Rent.
A home is always meant for living rather than an investment.
Also, there is something which cannot be quantified in an excel sheet -

The freedom and joy of owning your own home

- I can drill as many holes in the walls as I want.
- I can paint, decorate and allow my kid to spoil the walls as much as I want.
- Its my own home and I can pass the shelter to my kid.

Unless until one is in transferable job like a central Govt employee or a SBI employee, own home is always a bliss.

BTW, in Pune, Flat rent and cost has shot significantly post covid.
In my own society, a 2 BHK flat which used to cost 90 Lakh in 2020 is 1.5cr in 2024.

[Small Bot]

I can only talk about myself. I personally don't feel like buying a house for self and spouse makes financial sense to me at this stage of our lives (early to mid 30s).

It's still early in our careers. I've worked in five companies in four different cities in just more than a decade, and buying a house will deny me the flexibility to move around. Same with the wife, who's going to start her third job in her third different city shortly.

We've had some really bad medical emergencies over the last 4 years that our insurances could cover only partly, and I'd rather have that money in the bank in some FD or money market fund, rather than locked in an illiquid asset. Especially when I see both sets of parents age quickly and the health issues pile on.

While I get the well-intentioned advice of many that a house will give me emotional security, it's really not the case with me. I do not really care about an inanimate object like a house, if it meant diverting money that could be saved down elsewhere.

For us personally, wherever our parents live, that's kind of our home. Else, they're just another set of buildings. I respect other members' sentimentality over a house with their names in it, but I personally don't have that sentiment, or feel any lesser that I don't.

That said, the wife and I believe in slow accumulation of land and gold, as that doesn't strain our finances as much as a home loan would.

In essence, Renting over Buying. Land over House.

[UPS_Guru]

Zerodha founders prefer renting vs buying a house.

Nithin: https://www.hindustantimes.com/trend...661699214.html

Nikhil: https://www.moneycontrol.com/news/tr...-12335181.html

[cs_rajesh]

Is it all about money, loans, down-payments, EMIs?

I would choose an option that gives me joy and happiness, peace of mind, wellness and health.

When I need to choose a location, environment and surroundings, structure, ventilation, space, etc, it is quite rare to get such house for rent at affordable cost and finally the buy option seems to work out.

The buy option is the best and has worked out for me always,
a. even if the asset may be depreciating (real estate is usually not considered a depreciating asset, however, most of the building apartments are depreciating)
b. even spending more on an asset and even when cost of ownership is higher (EMI, Interest, House maintenance by self, etc)

[nri2ri]

If you chart two lines with time on one axis and affordability and net worth on the other, you'll see that most people develop a bias to own "real" estate by the time both lines are ready to cross. More so if you had to work hard and move upwards financially compared to the previous generation.
I'll buy any day over renting because of said biases but that's knowing very well that the financially sound thing to do might be to rent. I believe real estate as an investment only works if you buy down compared to what you can afford.
If the value of the home you own appreciate in the future, that implies you are not getting the most value today. All the rental yield calculators will also tell you the same thing. Best of both worlds might be to rent the house you want to live in and buy some real estate purely from an investment point of view.