Should You Rent a House or Own One with a Home Loan?

You will have more mobility if you rent a property instead of buying one. However, if you prefer to avoid moving about, living in a rented house can be frustrating if you are requested to relocate. Your current lease may end, you might be looking for something better, or your landlord might sell the property and ask you to move out. If your income grows at a different rate than rent, you'll be forced to the outskirts of town in search of a cheaper location if rent continues to rise.

Let's find out if you should rent a house or own one!

Let's take a look at a real estate property that is located in Bangalore as an example. Let's say that the current market valuation is around fifty lakhs of Indian rupees. If one chooses to either buy or rent this property, the option can be broken down as follows:

• If a person chooses to rent this home instead of purchasing it, the immediate cost to the tenant will be between 12,000 and 14,000 Indian Rupees (INR) per month. After eleven months, there will be a rise in this cost. Because of this, a person could have to move to a new place each year to keep the same rental rate, or they might have to accept a raise of between 5 and 10 percent yearly. Naturally, wage increases will follow, but in addition to that, we must consider inflation.
• When a home is purchased using a home loan with a 20% down payment and an 80% loan, the amount of the monthly EMI payment will be Rs.32,000 (calculated at 7.25 percent for 20 years). And if you can make a down payment of fifty percent, your monthly payments will be at most twenty thousand dollars.

Further, according to Section 80C of the Income Tax Act, if you are already making payments on a home loan, you may be able to claim deductions of up to Rs.150,000 each year on the amount you are paying toward the principal of the loan. Suppose you and your family use the house you borrow to buy as your primary residence. In that case, you may be eligible for an additional tax deduction of up to Rs.200,000 on your mortgage interest payments.

Buying a home is a massive investment that will ultimately result in you securing a substantial amount of cash for yourself. Industry professionals recommend getting a mortgage loan, even if you already have enough money to pay for the house. It is preferable to make a sizable down payment on the property rather than spending considerable money all at once. The remaining balance can be paid through larger monthly installments (EMIs). You will not have to be concerned about exorbitant interest rates or lengthy repayment terms, and you will still be able to afford the home loan.

Wrapping Up

In conclusion, considering whether to rent or buy, it is essential to keep the long-term implications in mind. When you have sufficient funds in savings, a good credit score, consistent income, and the assurance that you will continue to reside in the exact location, you should consider making a purchase.