As property prices surge, many eligible buyers are renting a house instead of buying one. But, is that the right choice in the end? Let’s find out. Especially for a struggling startup entrepreneur, buying a house is not an easy decision to make; various factors determine the feasibility of homeownership, such as –
- The ability to service a housing loan, especially since home loan repayment is a long commitment
- Sufficient funds for the down payment
- The certainty of living in the same city
- Stability of your startup employment and future cash flows, etc.
One can conclude after considering these factors – however, economically speaking, which is the better alternative?
Renting Vs. Owning: Which Is Better?
Of the two alternatives, owning a house is a better investment in the long term. Case in point: the cost of living in a rental property is much higher than the cost of living in an owned property. Even when inflation increases, you won’t incur any additional charge, as the terms of a home loan are predetermined.
However, a rise in inflation increases property costs and subsequently, the house rent, which translates to a higher cost of living. Thus, for a rented property, future costs remain unpredictable.
Moreover, homeownership has several benefits, such as –
- Benefits of property appreciation – Over time, your property prices appreciate multi-fold, meaning your home’s value will be much higher in 30 years than it is now. Also, as inflation rises, your property value will increase as well, but for rental homeowners, it translates to hike in rent and additional expense.
- Safe investment – As a long-term investment, real estate is a safe choice that consistently increases in value, over time. A real estate property is a tangible, bankable, and valuable asset, unlike the volatile stock market, which is always subject to market risks.
- Assured tax exemptions – You can claim tax exemptions for both rental and self-occupied properties. The interest and principal of your home loan EMI is eligible for an annual tax deduction of up to Rs. 2 lakhs and Rs. 1.5 lakh respectively. Furthermore, there are special tax waivers and concessions available for women buyers.
- Forced savings – Paying a home loan EMI offers two primary benefits: increment in the proportional ownership of the house and forced savings. Instead of spending the EMI amount, you are investing it towards a valuable asset. Nonetheless, make sure to use a home loan EMI calculator for comparing lenders before closing the deal.
- Enhanced credit score – If you repay your housing loan EMIs on time, you build a high repaying capacity and consequently, your credit score increases. A high credit score can fetch you better loan terms and interest rates on your future investments. Based on your principal amount, rate of interest and tenure, you can easily calculate your EMIs using a home loan EMI calculator.
From tax benefits to financial security, owning a house is a better decision. Besides, first-time buyers now have access to affordable homes at lower home loan interest rates, thanks to government schemes like PMAY. Being an entrepreneur should not deter you from homeownership.
To obtain a smooth home loan, apply after ensuring your credit score and home loan eligibility are solid and increase your chances of loan approval and homeownership.