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Why owning a house is better than choosing a rented home-financial Implications

  • Owning a house could generate extra income, in the form of leases or rental values.
  • Rentals might also seem inexpensive as compared to the EMI within the short run however in the lengthy run, it is far higher than the cost of the house and the apartment value can’t be recovered.
  • A home owner can mortgage the property but a condominium property cannot be mortgaged with the aid of a tenant.
  • A tenant may need to shift out of a rented home anytime, on the request of the owner.

 Let’s understand it with Financial Implications;

Case 1: Let us assume that a person lives in a 3-BHK rented home and pays a rental of Rs 10,000 per month. The average rental appreciation is 5% PA.

Case 2: A person buys a 3-BHK house for Rs. 20 lakhs on a home loan for tenure of 20 years. He has occupied the home for 40 years, here’ a look at the detail Calculation.

Detail Calculation
Case 1 (Living on rent)
Assumed rent amount payable (per month) Rs 10,000
Rent appreciation increment (per annum) 5%
Expected rent amount payable after 20 years (per month) Rs 20,000
Expected rent amount paid after 40 years (per month) Rs 40,000
Total Amount paid as a rent in 40 years Rs 1.20 crores
Case 2 (Living in one’s own house)
Assumed home loan amount sanctioned Rs 20 lakhs
Tenure period 20 years
Interest rate 8.3%
EMI per month Rs 17,100
Total amount paid by the buyer in 20 years Rs 41 lakhs
Rent amount saved by a home owner who lives for 40 years (i.e., excess amount paid by the tenant in the last 20 years) Rs 79 lakhs

In the example above, the cost of living in an exceedingly rental property for one’s whole life would be much higher than living in one’s own residents Moreover, the capital price of a home conjointly will increase over a period time, whereas, you get no such profit in an exceedingly rental home.

Written By,

Nidhi Chouhan

Agrawal Builder’sSagar Group

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