You may have wondered whether it is better to buy a house or stay in a rented apartment. But it's important to understand that both have their own benefits. Moreover, there is no definitive answer as to whether taking a home loan and buying a house is better than renting. Buying a house or living in a rented house is an emotional decision. Buying or renting a home is driven by emotions rather than logic.

Home is different for different people. Those who have had to relocate in each city will want to buy a house as soon as possible and settle down. But a person who has lived in a city all his life may want to explore different cities and may not want to be so quickly connected to one city.

So it depends on your age, your current income, investments, liabilities, work scenario and how you see the world. Let's take a look at some of the factors that will help you understand whether you should buy a house through a home loan or stay in a rented apartment.

Advantages of Buying a Home with a Home Loan

Asset Creation - The most common benefit of taking out a home loan is that you are basically acquiring an asset. But the house you are building to live in cannot be considered an asset. But if you have a spare room to rent or you decide to rent out the entire property, it can generate income and thus be seen as an asset.

Consistency is another key factor. By owning a home, you don't have to change frequently, and you can have a stable environment where you can plan your life, including your children's schooling and other activities.

Rising rents in metro cities - In the last few years, especially after the pandemic, we have heard or had first-hand experience of skyrocketing rents.

According to various sources, residential rental values in India's top cities have increased a lot since the pandemic, witnessing an increase of more than 30% in the year 2023.

So, the gap between rent and home loan EMI is narrowing and more individuals are looking to buy a home.

Inheritance - A house can be passed on to future generations. So, if your child is settled in the same city, they don't need to buy a house. They can use their money to invest in their ventures.

Retirement - If you take a home loan in your mid-30s or early 40s, you can pay off the home loan within the working year. You don't have to worry about rent costs after you retire.

Emotional gains - Possessing a house will give you a sense of pride and security that cannot be given to a rented house. Owning a home gives you the freedom to customize your home the way you see fit and make it your home. Moreover, you don't have to worry about your landlord telling you to vacate the flat with sudden circumstances.

Reverse Mortgage - Reverse mortgage is the opposite of a loan. Here, you can borrow money on your house and the bank will give you a fixed amount every month. At the end of the loan or after the death of the last surviving spouse, the ownership of the house is transferred to the bank. Your children have the opportunity to pay for the house and get ownership of the house. While the concept of reverse mortgage is still not very common in India, it can help retirees with additional income to reduce their dependence on other sources of income or supplement their income.

Advantages of renting

Flexibility - Renting a home can be a good option if you prioritize flexibility. Rental housing is more effective if you do not plan to live in a city for more than seven years.

Low start-up costs - When you look at the down payment and closing costs of buying a home, you need less upfront money to rent a home.

Moreover, it is important to understand that the total amount of interest payable against the loan will be more than the actual amount.

For example, if you have taken a home loan of Rs 2 crore at a rate of 8.75 per cent for 20 years, you will have to pay a total interest of Rs 2.24 crore, which is higher than the original amount.

There are no maintenance costs - the landlord usually handles maintenance on the rental home. While these costs may seem insignificant at first, if you add up these small expenses, it can be a huge amount.

Choosing between renting and buying depends on your current financial situation, future plans, and personal preferences. Therefore, it is important to consider these factors before making a decision.