Fixed Deposit

Does it make sense to stay on rent or to own a house?

From landlords breathing down your neck to increasing monthly rents every year, staying in a rented house can be quite a headache. A stark contrast to that is owning your own pad – big or small, one’s own house has a charm of its own. And now with banks such as IDFC giving away low-cost house loans, owning a house is no more a distant dream.

Still in two minds? Okay, let's take a look at the entire renting versus owning game to sort things out better for you:

A sense of security: Having your own house, of course, has a higher sense of security than staying in a rented place. Both in India or abroad, landlords tend to restrict the number of years that a tenant can stay in their house. Shifting houses every two years is no easy plight and can be a cause of a lot of harassment. Suppose you took up a house closer to your office and your child’s school. After a year, the landlord asks you to vacate the house, with just one month’s notice. It might not be possible for you to find a house with the same locational advantage in such a short period. Besides, shifting involves a lot of extra costs such as paying packers and movers, re-installation of necessary household items such as geyser, water purifiers, AC etc. All this can heavily affect your budget and can be a big cause of stress. In your own house, you wouldn’t have to worry over such things at all as right from shifting to the installation of all kinds of stuff, all of it is going to be a one-time investment. Plus the sense of pride and security that you will get in your own house is unparalleled. And with home loan interest rates slashing every other day, it’s not utopian to think about owning a house anymore.

Freedom to live: Pesky landlords can wreak havoc in your life, and make it hell. From adding no-boyfriend/girlfriend clauses in the rental agreement to restriction on non-vegetarian food and late night house parties, landlords often tend to get over interfering. When you live in your own house, all these would not be an issue. At your own home, you can live life on your own terms without someone trying to dictate how you should lead it. With banks such as IDFC offering affordable house loans, home loan interest rates are also coming down, and hence you wouldn’t have to lose sleep over paying home loan EMI.

Financial implications: In the short run, rentals may seem like an easy and cheaper option compared to the home loan EMI but in the long run, it can actually turn out to be much higher than the cost of the house. Most importantly, the house rent cost cannot be recovered.

Let’s take a look at a hypothetical calculation on the home loan calculator for a house on rent at Rs. 20,000 per month with 5 percent rent hike every year for 40 years versus a home on which a house loan of Rs. 40 lakh has been taken with an 8.3 per cent home loan interest rate. At a 5 per cent rise in rental every year, the total amount of rent paid after 40 years will be Rs. 2.1 crore. Whereas, if you consult the loan EMI calculator, your monthly home loan EMI will be Rs. 34,200. Over 20 years, you will end up paying approximately Rs. 82 lakh, and after that, the house is entirely yours. You wouldn’t have to pay anything. But if you are on rent for 40 years, the excess amount paid by the tenant in the last 20 years will be Rs. 2.1 crores. So, if you take up a house loan, despite the higher EMI compared to the monthly rent, in the long run, you actually end up saving more.

Mortgage loans and rentals: If you own a house, in times of need, you can actually mortgage the house and take a loan against your property. Both public and private sector banks such as IDFC bank give loans against property, and the interest rate charged is lower than personal loans. What’s more? If you own a house you can even let out a portion of it to tenants or to paying guests, and with the rental income, you can happily keep paying your home loan EMI.

Already kicked about owning a house? Well, we say, take the plunge, and lead life your own way. Once you zero in on any property, you can always consult IDFC bank’s loan EMI calculator to get an idea about how much home loan EMI you need to pay. You can compare different property rates and then take a call.