Cash or loan to buy a home? Chartered accountant on how to weigh trade-offs

Age, risk appetite and financial discipline should shape a person's choice, according to Ruchita Vaghani

Should you buy a home costing Rs 1 crore outright with your savings or spread the cost with a loan? The two options have their own trade-offs and the “right” choice depends on one’s age, risk appetite and financial discipline, according to Ruchita Vaghani, a chartered accountant.

 

Paying in cash has no strings attached and brings peace of mind, she said on X. For those who can afford it, buying in cash means:

 

• No EMI burden, no interest cost. 
• Immediate ownership of the property. 
• Stronger negotiating power with sellers. 
• Freedom from rising interest rates.

 

The trade-off is that money will be locked in a single illiquid asset and buyers will miss out on potential returns from other investments, according to Vaghani. Liquidity for emergencies reduces as well.

 

Taking a loan: liquidity and tax benefits

 

A home loan allows buyers to keep their savings free for investment. The advantages include:

 

• Liquidity safety, capital can be invested elsewhere. 
• Tax savings of up to Rs 3.5 lakh annually on principal and interest under the old regime. 
• Repayment with “future money”, which may feel easier as incomes rise. 
• Potentially higher returns if investments outperform the loan’s interest cost.

 

The catch: equated monthly installment (EMI) of about Rs 86,000 a month for 20 years. That means a Rs 1 crore loan eventually costs around Rs 2.07 crore (including Rs 1.07 crore in interest). The dependence on steady income is crucial, and if investments underperform, the bet can backfire.

 

How to decide?

 

Vaghani suggests buyers weigh personal priorities before making the call.

 

Pay in cash if:

 

• You are risk-averse or near retirement. 
• Debt-free living and peace of mind matter more than returns. 
• You want to avoid EMI commitments.

 

Take a loan if:

 

• You are younger (under 40) with a stable income. 
• You can invest the surplus wisely in equities, mutual funds or business. 
• You are comfortable managing debt for long-term wealth creation.

 

In short, there is no one-size-fits-all answer. What matters is whether you value financial freedom today or the possibility of higher returns tomorrow.