Buying vs renting a house: What is better?

The rising cost of real estate begs the question: Is buying a house any better than renting?

Residential properties have become extremely expensive. The cost is even more in metro cities, which has forced people to think about whether to buy a house or rent one. Buying a house is complicated as it requires massive capital infusion. You might need to make a sizeable down payment and avail of a multi-year home loan. These costs do not apply when you rent a house, which makes it an attractive choice.

However, renting a house has some pros and cons as well. In this article, we will see if buying or renting is better in the long run.

Buying vs renting a house: Pros and cons

Here are the pros and cons of buying vs renting a house.

1. Buying a house entails a monthly commitment for upto 20 to 30 years. It means most of your professional life would go into paying off the online loan. You will need to exercise a significant amount of financial restraint, dedication, and sacrifice in the early years of your career.

The costs of renting a house are lower and more flexible, especially when working from home. If the rentals become expensive, you can negotiate lower rents or move to a different property with lower rates.

2. To obtain a home loan, you must also make a down payment. Most banks require a 20% down payment, though it can reduce to 5%. The larger your down payment, the lower your EMIs will be. A down payment of roughly ₹10 lakh is required for a property valued at ₹50 lakh. It means you will need to start saving or investing a few years before you decide to purchase a property.

A tenant renting a house only needs to be concerned about their monthly bills, leaving the rest to the landlord.

3. Homeowners must also invest thousands in real estate taxes and periodic repairs and renovations. Local authorities levy property taxes, whereas maintenance costs are levied by the housing society that supplies the shared facility. Operational expenses could range from 1-2% of the property buying cost at the current rate, and you can expect these costs to climb at a 3-4% yearly rate.

4. Home loan interest rates have dropped dramatically in the last few years, resulting in lower EMIs. A few years ago, the EMI on a home loan was roughly ₹1000 per month for every ₹1 lakh loan with a 20-year term. It has now dropped to somewhere between ₹750 and ₹800 each month, which has made buying a house more affordable.

In the long run, renting a house is costlier. The money you pay every month does not help secure the house. Adding a little more to the rent amount could help you pay the EMI for a house.

5. However, rentals are still substantially cheaper than EMIs for houses in most cities. For instance, presuming a 20% down payment and the current home loan interest rate of roughly 7%, a house costing ₹50 lakh will require ₹31,000 in EMI. In contrast, the same unit can cost roughly ₹5,000 per month in rent. Unlike the EMI, though, rents increase at an annual rate of 8-10%.

There isn’t a right answer to whether you should buy or rent a house. It depends on your financial situation and long-term goals. If you are interested in buying a house and require a home loan, look no further than IDFC FIRST Bank.

You can get home loans at attractive interest rates, which helps your finances. Customer service at IDFC FIRST Bank is also the best in the market, while the application process is easy and 100% online. So, what are you waiting for?

Disclaimer

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