June 30, 2011
Do you think owning your own property is financially out of reach? On the contrary, new figures reveal that the monthly cost to rent a house in the nation’s capital cities is on par with repaying an average-sized mortgage.
Take Sydney, for instance, where the median weekly rent for a house is $485, or just over $2100 per month, according to Australian Property Monitors’ March figures.
By comparison the national average mortgage repayment is around $2150 – based on the benchmark variable rate (the average of the major four banks) of 7.14 percent for a $300,000 home loan paid over 25 years. The difference is little over $1.60 per day – less than your daily coffee.
Buy a home in Darwin, however, and you’ll be around $20 per month better off than if you rent one of the city’s houses, with median rental prices at $500 per week. Although to buy a place you will have to put down a hefty deposit in the first place.
Cut owning costs further
Getting into the property market may be a challenge, but with interest rates steady and property prices in a lull, now may be a good time to take the plunge.
Plus if you compare interest rates online and look to some of the smaller providers for your mortgage, you’re likely to secure an even better rate. For instance, while the big banks charge 7.14 percent on average, some of the best low-interest home loan rates available through RateCity are as little as 6.58 percent, such as Loans.com.au Dream Loan Express for a $300,000 mortgage. By opting for the cheaper rate you’ll be around $110 better off per month in this case, which makes owning a home seem even more affordable compared to renting.
Renting has its advantages too
It’s not all bad news for renters – in fact renting a property has its financial benefits over owning. Firstly, your landlord is responsible for repair and maintenance expenses, so if your hot water system throws in the towel, it won’t be you shelling out thousands to replace it. It’s easier to move house as a renter too as most rental contracts lock you in for around 12 months or less. Selling and moving on the other hand can be stressful and costly.
While the cost to buy may be comparable with rents now there is a chance that interest rates may rise, making repayments less affordable. But ultimately comparing rates and switching to a cheaper home loan means you have greater control over how much money you spend, unlike rent.
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