What is Better- Home Loan or House on Rent? - Make Money Online

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What is Better- Home Loan or House on Rent?

Majority of individuals long to own a home of their own whether an independent house in rural areas or a flat in an urban complex.Till a few years back, the dream to own a house propelled many to take loans or save for owning a residential property.Mortgage loans helped many realize such a dream till the recession of 2008 brought everything to a halt. 

The sub-prime lending in the US shattered the real estate sector and homes were selling at record lows as cash was in short supply.Even in India, the recession had its impact but the cash economy helped tide over the shortage and housing prices shot up considerably in 2014 with flats selling at highly inflated prices.

The demonetization in 2016 put an end to the skyrocketing demand for flats and a youngster who dreamt of buying a flat, suddenly turned cold seeing the extremely high prices with a decent 2BHK costing a fortune in metro cities.It did not make sense for a young person to buy a house or flat, tie themselves to a housing loan for the next 20 years with mobility restricted severely.On comparison, the outgo required for a home on rent was much lower and with a choice of location, a good wage earner could opt for residing in a prime location where he could not afford to buy a home because of the heavy capital outgo.

Studies have shown that staying on rent in major cities is cheaper as buying ties down a person to a home for years before he can redeem the initial capital burden as the yearly increment in carefully negotiated rental is far less than the cost by way of loan repayment, taxes etc. on a property. The main advantage is mobility as a working couple can always move around in search of better job opportunities, renting out a home at the new location, may be at cheaper rates than in an expensive metropolis.

Some of the disadvantages of the rental approach is mainly the uncertainty of location as rentals are always time bound and the tenant has to look for alternative accommodation, affecting the established routine of the family, especially school going children.Ownership of a property will always remain a dream as very few can afford to buy an expensive place on their own, without assistance of a home loan.

One way out seems to be the ‘Renting to Own’ scheme where a person starts as a tenant, paying a little more than standard rent for a place with the intention to buy from the owner at a pre- agreed price,and for tenures of 3 to 5 years at the end of which the tenant agrees to buy the property outright at the previously agreed price. While the concept seems a win-win for all, many times, the tenant is not in a position to raise the required amount when the time comes and instead loses all the extra payment made and maintenance spent on the property.
What is Better- Home Loan or House on Rent? What is Better- Home Loan or House on Rent? Reviewed by RAWAT on 2:30 AM Rating: 5