Everyone wanted to have their own house irrespective of house taken by Home Loan. It was a perception that whatever rent we pay it will go in waste instead why not paying the little more amount adding to existing rent amount as an EMI and own a house.
But Few people says we should not invest in own house instead staying in a rented house would be more valuable having reason said that whatever money you save apart from the rent can be invested somewhere else and get more returns.
If you want to understand above facts by using calculations then look at below.
Calculation of Rented House
Suppose every month you pay a monthly rent of Rs 20,000 and stay on rent for next 15 Years, You will be benefitted in saving Tax on HRA based as per your Taxable bracket. Suppose you fall in 20% bracket, your effective rent will be Rs 16,000 which means yearly it will be Rs 1,92,000. If your rent is increased by 10% yearly, then you will end up paying on Rent over a 15years around Rs 67 Lakhs.
On the other hand, if you don’t buy a house, Invest your initial downpayment on an average Rs 10 Lakh in some fund i.e Mutual Fund or ELSS etc. which will grow on an average of 10-12% then you will end up having a lump sump in your bank account over a 15 Years will be Rs 55 Lakhs. Every month you were suppose to pay EMI of around Rs 40,000 and deduct your rent amount i.e Rs 16,000 from this, then effective saving will be Rs 24,000. If you get 10% return on this, then over a 15 Years, your expected return will be Rs 1 Crore.
Calculation of Owned House
Assume you owned a house of worth Rs 60 Lakhs for a 15 Years Loan, Your initial down payment would be 15% i.e Rs 9 Lakhs then you will be needing a Loan on Rs 51 Lakhs for 15 Years at the rate of 7.9%, EMI will come around Rs 48,500. If you fall under 20% bracket, Your effective rate of interest will be 6.32% and effective EMI will be around Rs 44,000. As per this rate of interest your total interest on the loan amount will be around Rs 28 Lakhs. So your actual owned house cost will be around Rs 79 Lakhs but House will yours. Assume 5% property appreciation every year, then your owned house value will be around Rs 1.6 Crore.
Conclusion
Take your own wise decision and go with it, according to me Own House would be more valuable as we know dedicated EMI will be deducting from the salary and will give less space on your expenditure which means basically you are saving your EMI for your house whereas one would think saving lump sump every month and keep it aside, following this discipline will little tough in the real life especially with the increasing inflation. More Important, Buying in cash is always fruitful than taking a Home Loan.
