Interest rates rising: should I rent or buy?
It’s tough financial times at the moment and many are wondering what is the best to do - rent or buy.
It’s a big question and you need to weigh up the pros and cons of each when looking at the best financial decision for you.
RENTING
Pros:
- Rent is usually cheaper than repaying a mortgage
- You don’t owe a big debt to the bank
- You have more disposable income to spend on lifestyle
- The landlord covers cost of repairs
Cons:
- Rent money is "dead money"
- You can be subject to lease insecurity in today’s rental shortage market
- Spending money on refurbishment or gardens is a no-no, unless approved
- In reality, you struggle to save any of the disposable income you planned
BUYING
Pros:
- The monthly mortgage goes towards a personal asset
- You have a more secure roof over your head
- You can paint, renovate, landscape or do anything you like to the home
Cons:
- Most of your disposable income will go into repaying the mortgage
- You now owe a big debt to the bank
- You have less disposable income to spend on lifestyle
- You pay for repairs and renovations yourself
- Financial constraints may force you to buy in a less desirable suburb
On the surface, renting comes out on top but the fact is that many renters get lulled into a false sense of security and spend instead of saving the difference they would pay on a mortgage repayment versus monthly rental. This is a serious concern when you have set your heart on saving for a home of your own. And of course, putting money into a home of your own is the only way you will get your money back, or even make extra money, when you sell in the future. Renting is often a short-term solution while buying is a long-term commitment. However, you may well have to start out renting the cheapest possible place in order to save a deposit for your dream home.
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