1-Renting vs Buying Home:
When it comes to housing, an old British saying goes, “Fools build houses and wise men live in them” However, is it truly a good idea to purchase a house without first taking the cost into account?
Purchasing a property might be more emotional than financially driven, particularly if you don’t take ownership pragmatism into account. Banks typically only grant home loans for 80% of the cost of the property; the remaining 20%, along with stamp duty and other costs, are your responsibility. It’s important to evaluate your savings prior to applying for a home loan.
Experts say renting can be a better option if your profession requires you to move frequently or if you’re not sure you want to settle in a certain place.
Real estate transactions come with costs like stamp duty, registration charges, and brokerage, which cannot be recovered. In the long run, property prices tend to rise at around 8% per annum.
2-Factors to Consider when Opting for a Home Loan:
Apart from financial considerations, factors like the duration of your stay in a city and your intention to settle there should influence your decision. If it’s a short-term stay or a city where you don’t plan to settle permanently, renting is likely the more sensible choice.
3-Accumulating Wealth through Renting:
Expert suggests an interesting strategy. For instance, if you want to buy a ₹35 lakh property, the actual cost might be closer to ₹40 lakh, factoring in additional expenses. With banks typically disbursing up to 80% of the property cost as a home loan, you’d get around ₹28 lakh. Using mutual funds SIP (Systematic Investment Plan) with the surplus home loan EMI could yield around 12% annual return over 20 years.
4-Renting vs Buying Home:
For a ₹35 lakh property, you might expect an annual rent of 2.5% to 3% of the property cost. If you opt to rent instead of buy, you could save around ₹16,250 per month. Investing this amount in monthly mutual funds SIP for 20 years, with a 12% annual yield, could potentially grow to around ₹1.50 crore. In the end, the decision between renting and buying is not just about having a roof over your head but also about making sound financial choices that can lead to long-term wealth accumulation.
Note- Also read’ How to earn rs2000 Daily by Selling Credit cards’