Why Owning A House Is Better Than Choosing A Rented Home-Financial Implications?

Making a decision to buy or rent a home is a big thing. For many people, owning a home is worth it because it provides a feeling of security and stability that renting does not bring. Tenants have no way of making long-term investments in your property, which increases in value over time and increases your net worth.

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  • 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 a tenure of 20 years. He has occupied the home for 40 years, here’ a look at the detailed Calculation.

DetailCalculation
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 rent in 40 yearsRs 1.20 crores
Case 2 (Living in one’s own house)
Assumed home loan amount sanctionedRs 20 lakhs
Tenure period20 years
Interest rate8.3%
EMI per monthRs 17,100
The total amount paid by the buyer in 20 yearsRs 41 lakhs
Rent amount saved by a homeowner 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 of time, whereas, you get no such profit in an exceedingly rental home.

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