Home Loan EMIs vs Monthly Rent

Home Loan EMIs vs Monthly Rent is an age-old debate. For many a rental home costs less in the long term as compared to owning a home. Conversely, people who are in support of owning a home mention the investment aspect, emotional bonding, and lack of restrictions that it offers. There is no denying the fact that owning a home means financial stability for many. However, the skyrocketing property prices and always moving bases made people accept renting a property than buying.

Though, in reality, nothing can put this debate to rest. The pros and cons of both depend on the candidate and the situation. If you have the plan to stay in a city for long, have the necessary funds for the down payment and have a stable job availing Home Loan to buy a house is a good idea. On the contrary, if you are at the initial stage of your career, don’t want to break savings for the down payment, not sure about staying in that city for long, monthly rent is a better option.

Home Loan EMIs vs Monthly Rent

Home Loan EMI

When you choose to avail a housing loan you can pay the monthly instalments (EMI) to pay back the borrowed amount. This helps to enjoy the pride of owning a home. As you choose to own a home you can actually keep yourself out hassles of dealing with the landlord. Besides as you avail loan you do not have to break your savings. Hence you have funds to meet unforeseen financial crisis. Property is an asset for a life-time. Besides, owning a property gives you the flexibility to change the interiors as per your taste. Most importantly, the rate of the property increases over time, giving you good returns on your investment. The biggest fulfilment is you are paying EMI for something you are the owner of.

At times landlords put a restriction on the number of years a tenant can live in a property. Besides most landlords force tenants to vacate home every couple of years. It not only creates a lot of hassle, but shifting means expenses as well. Paying rent sucks at times.

Monthly Rent

Renting does not overburden you like paying EMI. When you stay at a rental home and have some financial emergency you have the liberty to go off. In case you are transferred to a different city; you do not have to bother. When you rent a property, you aren’t responsible for the maintenance, improvement, and repairs. Besides Real estate taxes can be a hefty burden for homeowners. However, renters don’t have to pay property taxes. Most importantly, renters might have to make a payment as a security deposit equal to one month’s rent. However, when purchasing a home by availing a Home Loan you need to pay a sizable down payment—usually 20%.

Home Loan EMIs vs Monthly Rent: How the Decision Unfolds

Let’s assume there is a property in Noida. The present market valuation of this real estate property let’s suppose to be 40 lakhs. Let’s make out if one should buy or rent this property.

First let’s consider rent: Say you decide to live in this property on rent. The immediate cost to you as the tenant will be approx Rs. 15,000 per month. This cost will enhance after every 11 months.

Now, you choose to buy the same property by availing a Home Loan. You need to pay 20% as a down payment. As you avail 80% of the property cost as Loan, it will cost around Rs.35,000 per month as EMI (@8.6% for 20 years). To put in simple words the EMI you pay is approximately 2.33 times that of rent (per month). Besides you pay a lump-sum of Rs.10 Lakhs as a down payment.

It is important to keep in mind that Rent is generally set for 11 months but adjustable rates can fluctuate. However, the cost difference between rent and EMI will always be there. If you can afford to buy a house at an early age you have a sense of relief after you retire.

To Sum up

So, Pay EMI or pay rent? Well, the final decision would be yours. It is, however, important that you do full research before you decide. Consider your need, financial state, age, liability lifestyle and then make the choice. There are Home Loan EMI calculators available online to give a clear understanding of the amount that you need to shell out towards the EMI. This blog intends to make an informed decision!

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