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Renting vs. buying – what should you choose?


Alex Ritchie

By Alex Ritchie

4 min read

Choosing between renting or buying property can be a daunting process.

The debate between renting and buying has been a hot topic as of late, with a rising housing market in Australia making an entire generation of buyers feel as if they’ll never be able to access it. But for many, rent money is ‘dead money’ and the appeal of owning their own home is unquestionable.

No matter what your situation, it’s important to examine all the options available to make the most informed decision.

Renting:

There are several positives to renting property in Australia. You will spend less in the short term as the costs of taking out a home loan and saving for a deposit on a house are far higher than the price you’ll pay for a bond.

For those who prefer to spread their wings rather than plant roots, you can also enjoy the flexibility of moving from place to place when your lease expires. Your wings can also take you to areas you couldn’t otherwise afford, which is great news for someone looking to live close to their inner-city office where property prices are far greater than rental prices.

Renting also allows tenants certain advantages, such as avoiding costly maintenance, repairs, rates and insurance that should be covered by your landlord.

Is this always the case? 

Australia’s first survey of renters – produced by CHOICE, National Shelter and the National Association of Tenant Organisations – has revealed that many tenants are too “scared” to request property maintenance.

While tenants are entitled to request maintenance, the survey revealed 50 per cent of renters were concerned about being “black-listed”, and 14 per cent said they had not made a complaint or requested a repair for fear of adverse consequences. There is less security with renting, as reflected in this survey, with landlords having the ability to increase your rent or evict you.

If you’re planning on renting you will also have less flexibility to make the home ‘yours’, as home renovations require approval from your landlord. Renting is also more expensive long term, as buyers should eventually pay off their mortgage in 20-30 years whereas tenants never stop paying rent.

Pros
  • Cheaper short term
  • Live in areas you couldn’t afford to buy
  • Flexibility (moving from place to place when lease expires)
  • Avoid  costly maintenance, repairs, rates and insurance
Cons
  • Less security
  • Less flexibility to make the home ‘yours’
  • Rising cost of renting
  • More expensive long term

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Buying:

A mortgage is one of the biggest obligations you will undertake in your life, and can be with you for 30 years or more. Choosing a mortgage is not a decision to be taken lightly, but there are many positives to making the decision to buy. 

Buying your home should work out to be cheaper long term as you will eventually pay the mortgage off. Your property should also gain in value over the lifetime of your mortgage, meaning you ultimately make a profit on your investment. And unlike the horror stories of renters as expressed earlier, you have the flexibility and freedom to renovate and make your house truly ‘yours’.

However, you will need to save a decent nest-egg if you’re planning on buying a house. The minimum amount for a deposit you will need to save is usually 5 per cent, although if you borrow more than 80 per cent or more of the homes’ value (less than 20 per cent deposit) you will be asked to pay lenders mortgage insurance (LMI).

On top of your deposit, there are upfront and ongoing charges you will incur, and you will need to cover the cost of ongoing maintenance on the property.

Pros
  • Cheaper long term
  • More security and flexibility
  • Property should increase in value
Cons
  • More initial costs (deposit, upfront and ongoing fees)
  • Ongoing maintenance costs

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Verdict:

There is no correct answer when it comes to whether you should rent or buy a home. Your choice will always depend on individual circumstances and preferences.

Explore first home buyer mortgages now

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