When considering long-term financial stability, comfort, and freedom, one may wonder whether renting a house is better than owning one.
Food, shelter, and clothing are essential for every person, and while food and clothing are usually accessible, the choice of where to live varies. Some prefer to rent a house, while others strive to buy their own home based on their financial situation.
The decision between renting and owning a house is significant because of the long-term financial implications and comfort. Let’s delve into the financial aspects of these two options.
Many middle-class individuals believe owning a home provides a sense of permanence instead of renting. They may take out a loan or mortgage to purchase their own house.
Homeownership elevates one’s social status and provides comfortable living space. It offers the freedom to design the house according to personal preferences and family needs. Additionally, homeowners may benefit from tax advantages and principal and interest payment savings.
Living in a rented house does not offer the same freedom. Renters must conform to the landlord’s rules and tastes. Sometimes, they may be asked to vacate the property inconveniently, leading to longer commutes for children and parents.
Furthermore, renters may need more freedom to make desired changes to the property, and rent hikes can become a significant concern.
On the other hand, homeowners do not face the same uncertainties. They do not have to worry about rent increases and have the flexibility to modify their property. Additionally, they need to experience the burden of rent payments.
On the other hand, some argue that renting a house can be a more financially savvy choice. They believe homeownership can bring about significant financial burdens while renting allows them to invest their money and potentially receive substantial returns.
Let’s illustrate the financial implications of renting versus owning a house with a practical example. Suppose you’re currently paying 20,000 rupees per month, with a yearly increment of 5 percent.
Over 20 years, you’ll end up paying approximately 1.26 crore rupees in total, which exceeds the cost of purchasing a mid-range house at present.
Now, let’s calculate the expenses of owning a house over 20 years. If you allocate 60 lakh rupees, make a down payment of 12 to 15 lakhs, and then take out a bank loan at a 7 percent interest rate, the total principal and interest payments over 20 years will be around 98,50,000 rupees.
By the end of the 20 years, you will own a house with increased value, providing financial stability, which is impossible if you continue renting.
Based on these calculations, owning a house is better for those with a stable income or job than renting. However, it’s important to note that these comparisons are specific to renting and owning a house, and other investment options may yield different results.