Every day there is a debate on social media about whether to buy a house or live on rent. Different people are seen giving different advice. Let us understand whether we should buy a house or live on rent.

Buying Vs Renting: Every person wants to buy a house, but the question arises whether he should really buy a house or not? Every day there is a debate on social media about whether to buy a house or live on rent. Different people are seen giving different advice. Some believe that buying a house is very important, while some consider a house as a burden, especially when it has to be bought by taking a home loan. So let us understand whether we should buy a house or live on rent.

Who should buy a house?

The most important thing for buying a house is that you should have the money to buy it or the money to repay the home loan. If you fulfil this condition, then the second thing you should check is whether it is your first home or you are just thinking about investing. If you want to buy a house for your living, then you should definitely buy a house. However, you should try to take as little home loan as possible and the period of repayment should also be short. The shorter the period in which you repay the loan, the less interest you will have to pay.

Understand the calculation as well

Let us assume that you buy a house for 20 years, which costs Rs 50 lakh. In such a situation, you will need at least 20 percent i.e. Rs 10 lakh for down payment. At the same time, you can take the remaining Rs 40 lakh as a home loan from the bank. Let us assume that you will get a home loan at the rate of 9 percent. Now we also have to keep in mind getting a low EMI. In such a situation, try to get the EMI made for a period of 20 years only. In such a situation, your EMI will be around Rs 36 thousand.

If you fall in the 20% tax slab, you will be entitled to tax exemption on the home loan interest paid in EMI. In such a case, your effective EMI will be around Rs 31,500 at a rate of 7.2%. In this way, you will pay only interest of about Rs 36 lakh on home loan EMI at a rate of 7.2% in 20 years, provided the interest rate of home loan remains the same during this period.

Apart from this, you will also have to spend money on maintaining your house in these 20 years. Let us assume that you will have to spend an average of Rs 2000 every month. These expenses can also increase by 6-8% every year. If we look at the maximum rate of 8%, then you will have to spend about Rs 12 lakh in 20 years only on maintenance. In this way, your total investment on a house in 20 years becomes around Rs 98 lakh (50+36+12).

The good thing is that after 20 years you will have your own house, which if sold can give you a profit. If the property prices increase at the rate of 7-8 percent, then after 20 years your house will be worth about two to two and a half crore rupees. Meaning you will get a profit of more than one to one and a half crore rupees.

If your job or income is not stable, then you should live on rent. On the other hand, if your job is such that you have to change cities frequently, then it is better for you to live on rent. The advantage of this is that you have to bear very little money burden every month. On the other hand, if you take a home loan, then you will have to pay EMI every month. On the other hand, if you are thinking of buying a house for a short period, then also you should consider not buying a house.

If you live on rent, then in a place like Delhi-NCR, you will have to pay about 15-20 thousand rupees every month for rent. Let us assume that even if you live in a cheap house, then you will have to spend about 15 thousand rupees. If you are in the 20 percent tax slab, then your effective rent will be around 12 thousand rupees, because you will also get the benefit of HRA i.e. House Rent Allowance. In this way, you will have to pay around 1.5 lakh rupees annually. Every year the rent will increase at the rate of about 10 percent. In such a situation, you will spend about 90 lakh rupees on rent in 20 years.

On the other hand, the 10 lakh rupees of down payment that you have saved by not buying a house, can be invested in the stock market or mutual funds from the very first day. You will get an average interest of 12 percent on this. In this way, in 20 years, your 10 lakh rupees will become about 1 crore rupees. Now with this calculation, you decide for yourself whether you want to buy a house or live on rent.