Renting vs. owning a home: Two very confusing choices plaguing people. Though most people take a stand in favour of owning a home by applying for a home loan, the truth is owning isn’t universally better than renting a home; neither is renting a simpler option than homeownership. So, which of these two is the right choice? Let us find out.
Pros and Cons of Owning a Home
Owning a home by applying for home loans may seem to be daunting; however, it is an investment in the future. This is not only because a home is one of the most valuable assets but also because this asset’s value appreciates over time by building equity. Also, with homeownership comes greater freedom to not only design and decorate the interiors just the way you want but also to live the way you please without any harsh restrictions. Another significant benefit of homeownership is that the Indian Government even offers tax deductions on both the principal loan amount and home loan interest paid. Furthermore, if you have a good Credit or CIBIL score, you can avail low home loan interest rates.
However, there is no denying the fact that homeownership comes with big responsibilities. Firstly, it is a long-term financial commitment, and some find it extremely difficult to meet home loan eligibility criteria. Moreover, all responsibility of home maintenance will fall upon you, from major expenses like furnace replacement to inexpensive ones such as plumbing work. Home loans also come with downpayments, foreclosure charges, etc. Finally, if the market conditions deteriorate over time, your home’s value may decrease instead of the other way round.
Pros and Cons of Renting a Home
For those who are not able to meet home loan eligibility criteria, for the time being, can choose to rent as it is definitely a cheaper alternative since no maintenance costs are involved. Moreover, if your job is such that requires you to continually shift places, owning a home may not be the right choice for you; you’d be better off by renting a house.
However, you won’t be able to get any tax benefits in case of renting. Plus, renting comes with a whole lot of restrictions imposed by the landlord because, of course, it is their asset and they can demand you to live by their rules. Moreover, you will not be able to build equity over time. And what’s worse is that your landlord can raise the rent or evict you at any time.
How to Decide?
Now, when it comes to renting vs. buying, no one-size-fits-all answer will suffice. Your individual needs and circumstances will determine the right choice. If you do have some ready funds for a downpayment, meet the home loan eligibility criteria, and hope to have a stable income down the road, it is in your best interest to apply for a home loan and become a homeowner.
However, if your current scenario is otherwise, you can opt for renting while you wait for the opportune time.
If you want to apply for a home loan to purchase a home, keep in mind to use a home loan calculator such as the home loan EMI calculator to know your monthly home loan EMIs in advance. This will help you to stay prepared. Why should you stop at renting when with a little smart planning, you can become the owner!