Should you buy or rent your home?

Should you buy or rent your home?

Deciding whether to rent or buy is a conundrum many people agonise over. Ask a bunch of people and you will get a different opinion from each one of them. So when there is such conflicting opinions and ideas surrounding the old rent vs. buy debate, how do you decide?

Ultimately it’s your personal and financial circumstances that will help you chose one over the other but there are a few things you should consider from a financial point of view before decide.

The pros and cons of renting and buying

To determine whether you will be better off buying or renting will depend on a number of factors such as your affordability, the price to rent and more. However, if you can afford to purchase a property, it may be worth your while considering both options.

For instance, RateCity compared the difference between the average rental prices with the average mortgage repayments based on five capital cities (Sydney, Melbourne, Perth, Adelaide and Brisbane) in Australia, and based them on the average standard variable rate of 7.05 percent for a 25-year loan term.

The results showed that the national average to rent a house at July 2010 was $1,520 per month. While the average mortgage repayments were $1,991 per month, showing that it was cheaper to rent by $471 each month.

While some instances, such as the example above, it may be cheaper to rent you should also consider that if you bought a house, would you be better off if it increased in value?

For instance, if the price of your home increased by 10 percent over the next five years and your house was valued at $500,000 it would be worth $550,000. Based on the national average figures above, you would have paid $119,460 in mortgage repayments compared to if you were renting you would have spent $91,200 if rents didn’t rise. That means you would have made about $28,000 in five years by choosing a home loan over renting.

The important thing to remember is that the money spent towards paying off your mortgage is actually paying down a debt. So each repayment is one step closer to owning your own home. When you rent, you are paying off someone else’s mortgage and the only person who has something to show for it is your landlord.

Here are a few points to consider in your rent versus buy debate;


  • Are you undisciplined? Buying a home acts as a forced savings.
  • Buying could be the start of your wealth accumulation.
  • If you want to paint your walls green – you can!
  • Once your mortgage is locked in you can reasonably budget for your monthly repayments as they won’t change all that much. Your landlord can’t put the rent up on you either.
  • It will give you a sense of stability. It’s your home so you can’t be kicked out or forced to move.


  • Home loan repayments are usually more costly so when you rent you will have more money in your pocket to spend on other things.
  • Carefree living. The plumbing broke? Your blinds need replacing? No problems, as that is all taken care of by the landlord, including rates and insurance.
  • Are you a floater? Is your family growing? If you like moving around then renting could be ideal for you. At the end of a 6 month lease you will be free to move onto wherever you like. Also, if your family is increasing and you need more room you can easily rent a larger place without having to buy a new home.
  • As monthly rent is still generally cheaper than monthly mortgage repayments, this will open up more options when it comes to deciding where to live and the size of your home or unit.

At the end of the day there are positives and negatives when it comes to renting versus buying property. There are also additional costs that you need to factor in when buying property such as maintenance, stamp duty, and lenders mortgage insurance. If you think buying a home is the right choice for you, compare home loans online to find a loan with a lower interest rate to keep your repayments down.

Need help calculating what your monthly home loan repayments would be? Use the RateCity mortgage repayment calculator to help you decided if buying is an option for you.

Did you find this helpful? Why not share this article?



Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy


Learn more about home loans

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

What is a construction loan?

A construction loan is loan taken out for the purpose of building or substantially renovating a residential property. Under this type of loan, the funds are released in stages when certain milestones in the construction process are reached. Once the building is complete, the loan will revert to a standard principal and interest mortgage.

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

What is the ratings scale?

The ratings are between 0 and 5, shown to one decimal point, with 5.0 as the best. The ratings should be used as an easy guide rather than the only thing you consider. For example, a product with a rating of 4.7 may or may not be better suited to your needs than one with a rating of 4.5, but both are probably much better than one with a rating of 1.2.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.