Is it Better to buy a House or Rent?

Buying a home can be financially rewarding, but owning a property is a big financial commitment that may backfire if you overpay. When you ask few questions to yourself, you’ll find all the answers to your question.

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Benefits of Renting a Property

  • Avoid worrying about the half yearly or yearly property taxes. Your landlord is responsible for it.
  • More liquid money or investment in liquid bonds i/o substantial portion of your wealth tied up in your home.
  • More financial and psychological flexibility.

When you start comparing the cost of owing rather than renting an apartment on monthly basis, you might discover that renting cost would be way less than buying a new property. However, don’t just directly jump to conclusions because you shall be comparing the cost of home today with rent you’re paying now. What about 20 to 30 years from now? If you have made up your mind to buy a new property, then start finding the right one for you.

Benefits of buying a new Property

  • Avoid worrying about increase in rental expenses every year.
  • The EMI amount gets fixed for the tenure you opt for and doesn’t increase over a period of time.
  • Qualify to get deductions under section 80C.
  • Feel more secure in home ownership.

Comparison between own home and rented home

OwnershipRental Property
Assume the home loan amount of Rs. 30,00,000 lacs.
Interest rate is 8% p.a.
Tenure of 20 years.
EMI would be Rs. 25000/- p.m.
Total amount paid in 20 years is Rs. 60,00,000 lacs.
Assume the rent p.m is Rs. 12,500/-.
Rent appreciation p.a is 5% and 2.5% inflation.
Rent after 20 years would be around Rs. 50,000/- p.m.
Therefore in 20 years you would pay Rs. 65,00,000/- in total.
NOTE: Capital appreciations of new home and standard of living in rental home is not considered in the above comparison.

In the above comparison, it makes more sense to buy a new home instead of renting a home.

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