How Can Buying a House Save You Money Than Renting?

It has been one of the never-ending debates as to which one is a better option when it comes to buying a home or renting. There are different rules and regulations that dictate the superiority among the two but owning a house always feels greater as compared to renting. However, the property trends also fluctuate from time to time making it hard to come to a final conclusion.

This debate gets more interesting depending on your purpose. If you are going to buy property for end-use or you simply want to invest in property. Keeping that scenario aside, we will only focus on end-use. Therefore, if you are looking to buy a house or renting it, here is a list of things you should consider before taking the final call:

Buying a house is cheaper than renting – Although buying a home may look expensive at the outset but it is not when you compare it on paper. A small case study will help you understand the advantage of buying compared to renting.

Case 1 (Living on rent)

Assumed rent per month is Rs 20,000 with a rent appreciation of 5% per annum.

Therefore, the expected rent after 20 years will be Rs 40,000 per month and it will be Rs 80,000 per month after 40 years. Hence, the total amount you will be paying in that tenure is Rs 2.9 crores

Case 2 (Living in one’s own house)

Assumed home loan amount is Rs 40 lakhs with tenure of 20 years at 8.3% per annum will force you to pay an EMI of 34,200 per month. Hence, the total amount paid in 20 years will be Rs 82 lakhs.

Rent amount saved by a homeowner who lives for 40 years as compared to a tenant in the last 20 years is Rs 2.1 crores.

It helps you build equity - One of the biggest advantages of buying a home is that it helps you in building equity, which is your share of the value of your home. To put it simpler, it's the difference between the market value of your home and the amount that you still owe. Say for example you pay 20% down payment on a home that costs Rs 1,00,00,000 you would owe Rs 60,00,000 and your equity would total Rs 40,00,000. Now, the value of the property increases every year making your equity goes up while the amount you owe remains the same.

Let's say that in a few years, the market value of your home increases to Rs 1,10,00,000 and you've paid off a total of Rs 70,00,000. In that scenario, the money you owe remains the same at just Rs 30,00,000 but your equity will be valued at Rs 40,00,000.

Privacy, Security and Pride – These three things are very important especially in India where your home is not just an address you live but a reflection of your persona. Your own personal home gives you the utmost privacy with a sense of security that no matter what, there is nobody who would ask you to vacate that house. This feeling of pride in owning a home gives you pleasure and confidence to build on it for future growth.