Buying a house is a better long term option than renting

It is often said that a man travels the world over in search of what he needs and returns home to find it and a comfortable house is a great source of happiness. A house ranks immediately after health and a good conscience.  The house which you own is a most comfortable place on this planet for you rather than a rented one. You can be the king of your small kingdom in the house you own.  Hence, everyone dreams about buying his own house where he can live peacefully and happily. But buying a house is not a cakewalk. The property rates are not affordable to everyone. Buying a house is a big decision for a salaried general working person. It takes lots of courage and financial arrangements to buy a property. Those who take this decision eventually own their dream house. Those who cannot take this decision chose an option to live in a rented house. The question is why this is so difficult for many to take this decision? Maybe people are paralyzed by the fear of making the wrong decision and a big fat loan.

A common man can only dream of buying a good house in a good locality at an affordable price as the property rates are skyrocketing. But thanks to some pocket friendly schemes, people can fulfill their dream of buying their dream house at an affordable rate. But many people often argue that a rental home costs less compared to buying a property. If one is sure that he is going to stay in the same city in the future, has the financial capacity to pay the down payment and has a stable cash flow for the future, then it is a wise decision to invest the money in the property.  Buying a house would require lots of savings in the form of home loan payment; it will be a good decision.  Most people spend their hard earned money on a rent instead of taking a big step forward in buying their own house.

The benefits of buying a property over renting a house are more than we think. The rents keep increasing per year, and it’s not you, but your owner decides whether to keep you as a tenant or not. So the constant stress of finding a new rented apartment after every 2 years is too much. Plus, the money we invest in paying the deposit for the rental apartment, moving and shifting costs is not an investment, but expenditure.  When you buy a property with a loan, you already know how much EMI you will have to pay in the future. So, the future costs are predictable and more stable. There will be no interference of others and no dependency on others when you are living in your own house and you will be living with a sense of pride and security in your own house. 

Let’s assume that a family lives in a 2 BHK rented apartment and pays a rent of Rs 20,000 per month. The average rental appreciation is five percent per year.  Now a person buys 2 BHK home for 40 lakhs on a home loan for 20 years. Assuming that the above person will be living in a rental house for 40 years, following will be the financial calculations.

Now a person living on a rent will be paying Rs. 20000 per month as a rental amount. The rent appreciation per annum will be 5%. So the expected rent after 20 years (per month) will be around Rs 40,000. And the expected rent after 40 years (per month) will be Rs. 80,000 approximately. So the person will be paying the huge Amount of Rs. 2.9 crores (approx.) in 40 years. The maintenance charges will also get added.  And still after spending this much amount on the house, he will not own the property.   Whereas if a person takes a home loan of Rs 40 lakhs for the tenure of 20 years at the rate of 8.3% percent per year, his EMI will be somewhere around Rs.34,200 per month. He will pay Rs. 82 lakhs over the period of 20 years. After 40 years, if he survives, he or his family will save the amount by buying the property and not renting it and saving the excess amount paid by the tenant in last 20 years. The saved amount will be approximately 2 crores. Off course, the cost of living of the one who has bought the house will be lesser than the one who has rented the house, but in the long term, buying a property will be proven as a profitable deal. Rentals may appear cheaper than the EMI in short term, but in the long term, it is definitely higher than the actual cost of the house. And the rental cost cannot be recovered, but if you sell the house, the appreciation value will be much higher.  Once you buy the house, you can mortgage the property if you require the funds.  Buying a house can also generate additional income in the form of rentals paid by the tenant.

There is a pride in being an owner of a property. But it comes with the huge cost. You will have to curtail your expenditure for few years and will have do lots of savings.  You may not enjoy spending freely on the things you wish to spend. You may have to live a life with a low standard of living but ultimately you will have the property of your own.