What is better: Renting or Buying?
Apr 24, 2019 Real Estate News
On April 4th, Finance Minister Mr Arun Jaitely said that the government would try to bring down the interest rates for the home loans so that paying the EMI is the same as paying the rent. The announcement came after RBI reduced their repo rates by 25 basis points.
It has come as good news to the home buyers who are still wondering if they should take a step towards buying a house or continues living on rent. The home loan interest rates are at the lowest in the past five years. Most people generally refrain from getting into real estate and making the investment is because of the interest rates and the higher EMIs. The amount paid for rent is lower as compared to the EMI and people choose to pay rent rather than EMIs.
Seeing financially, the cost of paying rent is lower than paying an EMI. Renting a house worth Rs 50 lacs can be around Rs 10,000 to Rs 15,000. While buying a home worth Rs 50 lacs and paying the interest at the rate of 6.5 percent, the EMI comes around to be Rs 30,000 to Rs 40,000. The cost of paying the EMI is double the cost of paying the rent.
But in hindsight, with every EMI you are closer to owning the property, which is not the same with renting a property. Also, your landlord can ask you to vacate the property when they want, and you cannot keep renting the house forever. Moving to a new place regularly and starting all over again can be taxing and a waste of money.
When renting the house, most people don’t take into account that the rental price will go up every year as well. Every year the monthly rental increases by 11 percent that means by the end of ten years, the amount you will be paying for rent will be double of what you started paying.
The landlord can one day decide to sell the property, forcing you to look for another place to live. This is not the same as banks. Even if you fail to make the EMIs, selling your property is the last resort they take.
It has come as good news to the home buyers who are still wondering if they should take a step towards buying a house or continues living on rent. The home loan interest rates are at the lowest in the past five years. Most people generally refrain from getting into real estate and making the investment is because of the interest rates and the higher EMIs. The amount paid for rent is lower as compared to the EMI and people choose to pay rent rather than EMIs.
Seeing financially, the cost of paying rent is lower than paying an EMI. Renting a house worth Rs 50 lacs can be around Rs 10,000 to Rs 15,000. While buying a home worth Rs 50 lacs and paying the interest at the rate of 6.5 percent, the EMI comes around to be Rs 30,000 to Rs 40,000. The cost of paying the EMI is double the cost of paying the rent.
But in hindsight, with every EMI you are closer to owning the property, which is not the same with renting a property. Also, your landlord can ask you to vacate the property when they want, and you cannot keep renting the house forever. Moving to a new place regularly and starting all over again can be taxing and a waste of money.
When renting the house, most people don’t take into account that the rental price will go up every year as well. Every year the monthly rental increases by 11 percent that means by the end of ten years, the amount you will be paying for rent will be double of what you started paying.
Renting involves a risk
Even though your landlord is supposed to give you a notice at least a month or two in advance to vacate the place, they can ask you to immediately leave the place. If you lose your job or source of income, your landlord will not keep up with the same. While banks, on the other hand, will try to understand your position and will try to give you a holiday period where you don’t have to pay the interest. This will help you to get your finances in order and get ready to pay the EMIs again.The landlord can one day decide to sell the property, forcing you to look for another place to live. This is not the same as banks. Even if you fail to make the EMIs, selling your property is the last resort they take.
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