Buying Vs Renting: Buy a house or stay on rent, understand the calculation now..

Buying Vs Renting: Every person wants to buy a house, but the question arises whether he should buy a house or not. Every day there is a debate on social media about whether to buy a house or live on rent. Different people are seen giving different advice. Some believe that buying a house is very important, while some consider the house a burden, especially when it has to be bought by taking a home loan. So let's understand whether we should buy a house or live on rent.

Who should buy a house?
The most important thing to buy a house is that you have the money to buy it or the money to repay the home loan. If you fulfill this condition, then the second thing you should see is whether it is your first house or you are just thinking about investing. If you want to buy a house for your living, then you must buy a house. However, one should try to take as little home loan as possible and the period to repay it should also be short. The shorter the period in which you repay the loan, the less interest you will have to pay.

Understand the calculation too.

Let's assume that you buy a house for 20 years, which costs Rs 50 lakh. In such a situation, you will need at least 20 percent i.e. Rs 10 lakh for a down payment only. The remaining Rs 40 lakh can be taken as a home loan from the bank. Let's assume that you will get a home loan at the rate of 9 percent. Now we also have to keep in mind getting a low EMI. In such a situation, try to get an EMI for 20 years only. In this case, your EMI will be around Rs 36 thousand.

If you fall in the 20 percent tax slab, then you will be entitled to get tax exemption on the home loan interest paid in EMI. In such a situation, your effective EMI will be around Rs 31,500 at the rate of about 7.2 percent. In this way, you will pay only interest of about 36 lakh rupees on a home loan EMI at the rate of 7.2 percent in 20 years, provided the interest rate of the home loan remains the same during this period.

Apart from this, you will also have to spend money on maintaining your house in these 20 years. Let us assume that you will have to spend an average of 2000 rupees every month. These expenses can also increase by 6-8 percent every year. If we look at the maximum rate of 8 percent, then you will have to spend about 12 lakh rupees in 20 years only on maintenance. In this way, your total investment in a house in 20 years becomes about 98 lakh (50+36+12) rupees.

The good thing is that after 20 years you will have your own house, which if you sell, you can earn a profit. If the property prices increase even at the rate of 7-8 percent, then after 20 years your house will be worth about two to two and a half crore rupees. This means you will get a profit of more than one to one and a half crore rupees.

Who should live on rent?

If your job or income is not stable, then you should live on rent. On the other hand, if your job is such that you have to change cities frequently, then you should live on rent. The advantage of this is that you have to bear very little money burden every month. On the other hand, if you take a home loan, then you will have to pay EMI every month. On the other hand, if you are thinking of buying a house for a short period, then also you should consider not buying a house.

Understand its calculation too.

If you live on rent, then in a place like Delhi-NCR, you will have to pay about 15-20 thousand rupees every month for rent. Let's assume that even if you live in a cheap house, then you will have to spend about 15 thousand rupees. If you are in a 20 percent tax slab, then your effective rent will be around 12 thousand rupees, because you will also get the benefit of HRA i.e. House Rent Allowance. In this way, you will have to pay around 1.5 lakh rupees annually. Every year the rent will increase at the rate of about 10 percent. In this way, you will spend about 90 lakh rupees on rent in 20 years.

On the other hand, the 10 lakh rupees of down payment that you have saved by not buying a house can be invested in the stock market or mutual funds from the very first day. You will get an average interest of 12 percent on this. In this way, your 10 lakh rupees will become about 1 crore rupees in 20 years. Now with this calculation, you decide for yourself whether you want to buy a house or live on rent.