“To buy or not to buy?” is the age-old question. This is a common dilemma many people face in India, especially in urban areas with high property prices and rents. Both options have pros and cons; the best choice depends on your personal and financial situation.
So, let's compare the Home Loan EMI and monthly rent and help you decide which suits you better.
Also Read: Buy your dream home even if you are in your 40s
Advantages and disadvantages of Home Loan EMI
Pros:
- You own a property that can appreciate over time and provide you with a sense of security and stability.
- You also get tax benefits on the interest and principal components of the EMI under Section 24 and Section 80C of the Income Tax Act, respectively.
- You can use the property for your own use or rent it out to earn additional income.
Cons
- Home Loan EMI requires a large down payment, usually 20% of the property value, which can be challenging to arrange for many people.
- You must also bear the additional registration, stamp duty, maintenance, and insurance costs.
- You must commit to a long-term repayment obligation, which can affect your cash flow and savings for other goals. You can use Axis Bank Home Loan EMI calculator to determine how much interest you'll pay and the monthly instalment on your Home Loan.
- You even have to deal with the risk of default, foreclosure, or loss of property value due to market fluctuations or natural disasters.
Advantages and disadvantages of monthly rent
Pros
- It lets you choose a property that fits your budget, lifestyle, and preferences.
- You have the option to change your location or property as per your convenience or requirement.
- You do not have to worry about the property's maintenance, insurance, or depreciation, as these are the landlord's responsibility.
- If applicable, you can claim a tax deduction on the house rent allowance (HRA) under Section 10(13A) of the Income Tax Act.
Cons
- The main disadvantage of paying monthly rent is that you do not get any ownership or equity in the property, and you have to abide by the terms and conditions of the rental agreement.
- You also have to face the uncertainty of rent increase, eviction, or unavailability of the property at the end of the lease period.
- You also have to pay a security deposit, which the landlord may or may not fully refund.
Which one should you opt for?
The answer to this question depends on various factors, such as your income, savings, expenses, goals, preferences, and risk appetite.
You may opt for the Home Loan EMI option if you have a stable and high income, enough savings for the down payment and other costs, a long-term horizon, and a desire to own a property. You can use online loan calculator tools to compare the Home Loan interest ratesand the EMI for different loan scenarios and choose the one that fits your budget and repayment capacity.
Conclusion
The decision between a Home Loan EMI and paying monthly rent isn't one-size-fits-all. Each choice has its own good and not-so-good parts, and what's best for you depends on your unique situation. Before you make up your mind, consider both options' advantages and disadvantages and take your income and savings into account. It's all about finding what suits you best.
Axis Bank offers customised Home Loan solutions with flexible tenures, competitive interest rates, and easy application processes to make your home-buying journey smooth and hassle-free.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
