18 Oct, 2019
First Home Buyers Loan,Home Loans Comments Off on Is It Better To Rent Or To Buy?

Culture, economics, the property market and a ton of other factors are influencing factors to this question. Typically, when Australian’s speak about the Australian dream, they are referring to owning their own home. Some are of the views, that it is better to pay off your own mortgage and someday have a property which belongs to you! Every person has their own view and dreams that will influence your decision. Owning your own home is about making a lifestyle choice which has implications to your day to day life.

The table below offers some advantages and disadvantages that may be useful, to consider this question:

ADVANTAGES

Renting Owning
  • No long-term financial commitments to worry about
  • No need to save for a deposit
  • Remain financially free, no debt or mortgage
  • Freedom to move around freely without costs of buying and selling a property
  • All repairs and maintenance are paid by the Landlord
  • Even when you cannot afford to buy in an area you can afford to rent
  • You can determine the level of rent that you pay over time but you have no control over the interest rate of a loan
  • You channel your rent money into the ownership of a property
  • Owning a property allows you to financially benefit from increased property values. Over time, increased equity can be used to buy another property
  • Any improvements in your property add value to the property you own
  • Changing address is entirely up to you not the Landlord
  • You don’t need approval to have pets
  • If required it can be sold and turned into cash relatively fast
  • Equity achieved over time is yours to keep
  • You can hang pictures wherever you like
  • Someday you have an asset you can leave to loved ones

DISADVANTAGES

Renting Owning
  • You are vulnerable to the rental market. The less properties on the market the higher the rent
  • The term of your lease restricts your ability to move quickly if circumstances change
  • The Landlord chooses when it’s time to move
  • Restrictions on keeping pets
  • You are restricted in terms of the improvements you can make
  • Any investment you make on the property or the gardens are left behind if the Landlord wants the property
  • Long term commitment associated with the responsibilities of a mortgage
  • Vulnerable to interest rate fluctuations that if increase quickly can reduce funds available
  • Costs of buying and selling can be costly
  • You need to budget for ongoing expenditure like rates, water, and repairs and maintenance
  • Your budget for purchasing will determine the suburb you live in
  • Economic situations can drastically influence the value of your property
  • If property inflation is low, other investments can produce better returns
  • If you lose your job, you may find it difficult to make your repayments

Your income and the income of your spouse or partner also factor into the equation. The higher the income, the easier to afford a mortgage and you will save a deposit much faster. Higher incomes provide flexibility which fundamentally reduces your risk and exposure.

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