Rent House vs Bank Loan House:
The debate between renting a house and purchasing one with a bank loan is ongoing. While owning a home is a dream for many, buying one often requires taking a loan from a bank. On the other hand, renting involves paying increasing rent every year. Let’s break down which is more profitable: living in a rented house or buying a house with a bank loan.
Renting a house offers flexibility, especially for those who need to move frequently due to work or other reasons. However, the rent keeps increasing every year. If you are renting in a city center, rent can be quite high. In suburban areas, it may be more affordable, but it still increases annually.
Renting also does not give you ownership of the property. After several years of paying rent, you will still have no asset to call your own. The landlord can also ask you to vacate the property at any time, leaving you with no security.
Buying a home with a bank loan requires a good credit score and a steady income. While the loan EMI (Equated Monthly Installment) may seem like a burden at first, it helps you own a property. For example, if you take a home loan of ₹30 lakh at 9% interest, your EMI may be around ₹26,992 monthly. If your monthly income is ₹60,000, this EMI will take up about 40% of your salary initially.
However, over time, as your salary increases, the EMI becomes a smaller proportion of your income. In 20 years, your salary may triple, making the EMI much more manageable. Additionally, the value of your home may increase significantly. For instance, the value of your property may triple in two decades, which means you could own a home worth ₹1 crore instead of ₹30 lakh.
Ramesh buys a house with a bank loan. Over time, his salary increases, making the EMI easier to pay. The value of his property increases, and in 20 years, his house is worth much more than the loan amount.
Somesh, on the other hand, continues paying rent. After 20 years, his rent increases by 10% annually, and he ends up paying ₹50,000 to ₹1 lakh in rent. Despite staying in the same place, he remains a tenant without owning any property.
While renting offers flexibility, buying a home through a bank loan is more profitable in the long run. It helps you build equity, and as your salary increases, the EMI becomes more affordable. Plus, the property value appreciates, providing financial security for the future. Therefore, experts suggest purchasing a home through a loan as a better investment for the future.
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