Owning a house is a dream of many. It comes with pride and satisfaction when we see it from an emotional point of view. But when seen from a financial angle, renting turns out to be a more rational option. Let’s discuss the pros and cons of both, renting and buying a house.
Why is renting a house preferred?
Economical
The cost of buying a house is way more than that of renting. It involves the opportunity cost of the down payment amount (returns received if it was invested), interest paid on the home loan (assuming that the person is not a millionaire and will need external aid), maintenance cost, and other expenses.
Freedom and flexibility
A tenant is free to change their location but a house owner is not. House is an illiquid asset. Finding a buyer who is ready to pay the right amount at the right time is pretty impossible. Middle-class people generally put everything they have in the down payments and have a monthly burden of EMIs with high interest.
Affordable luxury
Rental yields in India generally revolve around 2 to 3%, which means, one can live in a house of 1 crore just by paying 2 to 3 lakhs rent per annum. It might not be possible for one to buy and maintain a house worth crores but it’s definitely possible to live in the dream house.
Why is owning a house preferred?
Emotional worth
One of the man’s three basic necessities, roti, kapda, and makan, is a house. And what’s better than having a permanent roof that can give more delight than anything else? It is both weird and true that people who possess a house are given more respect than the ones who don’t. Also, having a nameplate of one’s own name gives a sense of accomplishment.
Security and retirement planning
A tenant can be evicted easily whereas owning a house creates a sense of security. In times of crisis, the property becomes a cushion one can fall on. At the age of 60 or 65, after retirement, how can a person pay monthly rent with little to no income? Buying a house seems to be a better option for people seeking long-term goals.
Great investment
Real estate has always been considered a great asset, which never depreciates. Apart from some extraordinary circumstances, the value of property always appreciates, making you richer every year you can also consider REIT’s
Key Takeaways:-
- The choice of buying or renting depends on your financial capability, lifestyle, and personal goals.
- Renting offers freedom, flexibility, and cost benefits.
- Owning a house comes with a sense of security and accomplishment and provides the benefits of capital appreciation.
- Renting does not mean that you are throwing away money every month. You need a place to live and it will always cost something.
- Owning a house does not always help in building long-term wealth.
