Home Loan vs Renting: Which is a better option in the long term?
The primary reason behind people facing a dilemma over renting and buying a home is the insane cost of real estate in India. Also, the long tenure of paying Home Loan EMIs comes as a hindrance for many new home buyers.
Buying your dream home is a major financial decision as it may need huge investment. For home buyers paying rent or availing a home loan to purchase a house is a dilemma. The primary reason behind many people facing a dilemma over this choice is the insane cost of real estate in India and the long tenure of EMI payments.
As the question of living in a rented house or buying a home with the help of a home loan continues to remain a major question for many people, here are a few things the prospective new home buyers should consider.
Home Loan vs Renting
While buying a house may sound expensive, it is indeed a good investment as the appreciation is well worth the initial financial burden that one has to go through while purchasing the house. However, one needs to consider a lot of factors before investing in a house like the market rates, property location and most importantly the individual's budget.
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On the other hand, while renting a house saves on the cost of a down payment for a house, it may also help in cutting down costs in urban areas where the prices of houses are extremely high.
However, it may become financially exhausting for an individual to pay rent for a long duration. The money could be instead invested in other things like mutual funds, PPF or insurance.
Advantages of buying a house
1. Buying a house gives more freedom to the home buyers and they can get a property of their own.
2. Owning a house is a kind of asset that can be presumed as a financial security for the family.
3. Purchasing one's own house is also a good investment option as the value of the property is likely to appreciate in the future.
4. Home loans also help in availing tax deductions, which further aids in saving a good amount of money.
Advantages of renting a house
1. Investing money to rent a house helps in building a higher bankroll than would have gone towards the down payment of a house.
2. Renting a house is considered an affordable option in urban areas where property prices are high.
3. Renting a house is a good option for those who relocate on a frequent basis.
Which is a better option?
In the present scenario, while renting a house comes with its own set of advantages like providing flexibility and lower total cost, getting a home loan for buying a home can be a good investment on a long-term basis.
Rented houses are an ideal choice for eyeing a short-term solution while it seems like buying a house is a better option for long-term goals as it provides higher tax benefits, freedom, a social status and asset ownership. With the payment of EMIs throughout the loan repayment period you can own a house. However, it all depends on your income level and future investment plans.