Whether to buy a home or continue living in a rented house is one of the biggest dilemmas that home buyers are faced with today.
Most of today’s buyers think that renting a house would cost less as compared to buying a home.
If you are earning the right amount of money, and you know you are not going to change your city in the next five years and have the necessary funds for the down payment, it is highly recommended to buy your own home.
Why pay rent when you can pay EMI and own an asset?
Have you ever fantasized about not having to pay rent?
While owning a home is typically the dream of every Indian, you should do the math properly, if you think it’s a profitable long-term investment.
When it comes to buying vs. renting a house, there is always a heated debate about which makes the most financial sense.
Suppose let’s say Rohit lives on rent in a 2BHK in a prime location in Mumbai and pays Rs. 50,000 as rent. One can rent closer to work but the same properties may not be affordable within one’s budget.Therefore he has to search for a home in the outskirts or distant areas.
The first step is to calculate the capital needed to buy a ready to move flat assuming the market price is Rs. 50 lakhs.
Suppose he pays 20 percent of the total amount, i.e. Rs. 10 lakh as the down payment of the house. The bank will pay for the rest of Rs. 40 lakhs. At an 11 percent interest rate, the EMI amount would be Rs. 51,609.
Your investment value after 20 years will be Rs 21,139,546 after accounting for all the maintenance and transactional costs over the entire period.
If one opts for rent, he / she will have accrued Rs 3.59 crore at the end of twenty years, which is roughly Rs 1.5 cr higher than the value of the property.
For those of you who are still curious about the home loan EMI, here’s a look at how buying a house can change your life for the better.
Take a look at the benefits, why buying is better than renting:
1. Building your own asset:
Instead of paying rent, you may pay the home loan EMI thereby building up your equity over time. It essentially means a property or an investment that can generate income.
Your equity grows as you pay down your mortgage. Effectively, with every EMI that you pay each month goes to the balance on loan rather than the interest, thus building up more equity over time.
2. No Uncertainty:
With your own home, you will not have to face increasing rentals. Also, there is no fear and anxiety about renewing the rent agreement every year and re-negotiating on rent repeatedly.
3. Emotional security:
Purchasing a house on your own provides a sense of security and comfort, which is simply irreplaceable. Living in your own nest gives you the freedom to build memories for a lifetime. After all, there is no place like home where you can live at ease.
4. Home as a financial security:
Rentals may seem cheaper compared to the EMI in the short run, but in the long term, it is far higher than the cost of the house. Also, the rental cost cannot be recovered.
5. Suits Your Tastes, Not Your Landlords:
When you have your own home then you do not have to deal with the landlord; be it minor repairs or complete refurbishment, living on rent is a pain in many ways. You are dependent on the landlord for water, electricity, maintenance, and almost everything else.
6. Conforming To Social Norms:
And finally, buying your own home is a symbol of accomplishment, an important milestone in your life. Also, by purchasing a house, you can increase your social status significantly.
Buying a home requires a big financial decision. Though at times, it may look daunting but don’t get stressed. If you want to enjoy the feeling of being at your own home, you need to plan appropriately. Else you might have a huge loan where it will cause more stress than happiness.
At Shubham, we help our customers by guiding them to stay on the right path so that they invest smartly and save every penny. Take the first step here.