Better to buy a house or stay on rent? Know what is beneficial in financial terms!

Owning a home is an important milestone in everyone’s life. It gives freedom from all kinds of problems ranging from the hassle of changing the house again and again and arranges for permanent mental peace. Our home actually provides a sense of mental and psychological security. However, there is no dearth of people who advocate that living in a rented house is better than buying a house in financial terms. Such people argue that instead of EMI, rent is cheaper and the remaining amount can be invested properly and accumulated in it… In this way, living in a rented house for a long period of time proves to be financially beneficial. It happens.

advantages and disadvantages of both

Buy your own house or stay in a rented house…Which is more beneficial out of the two…all these are the subject of long debate. Advocates of both options count many advantages. The simple thing is that every step has its own advantages, but it also has its own disadvantages. There is an advantage of owning a house, but it also has its disadvantages. Same is about the rental house… it has both its own advantages and disadvantages. Today we are going to talk about this, where you will know what are the advantages and disadvantages of both the options…

Home loan is expensive now

First of all the matter of buying a house. The number of people who have enough money to buy a new house is small. Most of the people buy their house only by taking a loan. Home loan has a direct connection with the repo rate. An increase in the repo rate increases the cost of the loan. From May 2022, the Reserve Bank has increased the repo rate by two and a half percent, due to which the home loan rates which were around 6.5 percent are now above 9 percent. However, the RBI has retained the repo rate at 6.5 per cent in the April 2023 monetary policy, due to which there are speculations that there may not be any further increase in interest rates.

real cost of buying a house

Home loan rates of the largest bank SBI are currently starting from 9.15 percent. Let’s assume the price of the house you want to buy is Rs 50 lakh. The cost of a 3BHK apartment at a decent location in any city is around this. Now let us assume that you are going to make 20% downpayment out of pocket and 80% i.e. you are going to take a home loan of Rs 40 lakh. Taking a loan of Rs 40 lakh at the rate of 9.15 per cent for 20 years, its monthly EMI will be Rs 36,376. Accordingly, you will have to pay Rs 87 lakh 30 thousand 197 to the bank in 20 years, in which Rs 40 lakh is principal and the remaining Rs 47 lakh is interest. That is, after 20 years this house will cost you about one crore rupees. The annual growth rate of the real estate sector is 5-6 percent. In this sense, the house which is worth Rs 50 lakh today, will be worth Rs 1.3 to 1.6 crore after 20 years.

rental math

Now let’s talk about the rental situation. To live in a similar house of 50 lakhs, you will have to pay around Rs 20,000 per month as rent. In such a situation, if you live on rent, then Rs 16,376 is saved every month. By investing this money in mutual funds through SIP, you will get Rs 1 crore 58 lakh after 20 years according to the expected return of 12%. A total of Rs 96 lakh 46 thousand 293 will be received by making a separate lump sum investment of Rs 10 lakh as downpayment. That is, in this situation, after 20 years you will have more than two and a half crore rupees. In this context, staying on rent proves to be a better option.

Benefits of living on rent

Living on rent is cheaper than EMI. There is no hassle of down payment. You can easily change your house if you change your job or don’t like the location.

advantages of buying a house

By paying EMI, you are creating an asset. A deduction of up to Rs 1.5 lakh is available on home loan principal repayment under 80C and up to Rs 2 lakh on interest under section 24. There is no hassle of shifting and landlord.

Disadvantages of Renting

There is no return on the money you are paying in rent. Every year the rent increases by 8 to 10 percent. You cannot get any work done in the house without the consent of the landlord.

home buying disadvantages

Expenses like downpayment, stamp duty and registration charges and EMI have to be borne. When money is needed, the house cannot be sold immediately.

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