(Guest Post)
As the property market bounces back in many cities, many consumers are thinking about purchasing their first home while property prices and interest rates are low. Yet home ownership is not always the most cost-effective form of housing. Renting can actually save you more money in certain circumstances.
It’s helpful to take a closer look at the case for both renting and buying before making a decision. People across the globe are increasingly considering the Australian dream and finding the right place to live is certainly part of it.
How Renting Can Save You Money
There are many situations in which it may make more sense to rent your home rather than buy it. You may wish to rent a house with Homesales or other rental listings if you have just moved into a new city like Sydney or Melbourne. Renting gives you time to suss out the local market and learn more about the various neighbourhoods before you buy, so that you’re able to make a sound investment. This also gives you more time to establish your credit locally, potentially garnering lower interest rates in the future. One of the major benefits for renting is that it gives you a higher degree of flexibility. If you need to move around to establish your career, you’ll be able to do so and enter a higher income bracket before making a purchase. Renting gives you time to get truly settled into a location before you start looking at houses for sale.
On a strictly financial level, renting frees you up from worrying about maintenance and repairs. It also involves fewer upfront and closing fees than buying, which leaves you with more cash to invest. Without a down payment, you are able to invest your money elsewhere rather than tying up your entire nest egg in property.
How Buying Can Save You Money
Despite the Australian property market being one of the least affordable one, becoming a homeowner has many financial advantages as well. Security is a major factor to consider. Buying locks you into a set mortgage agreement, which will not change until the home is paid off. However, renters may see their cost of living jump higher each year as the market changes, as most leases are only drawn up for 12 months. Buying property is also an effective investment. Although it may incur greater fees, the money you put into repairing and maintaining your home will only help increase its value over time. Mortgage payments help you build equity, rather than paying rent each month which only goes into someone else’s pocket. For those interested in undertaking a mortgage, a recent research have shown that financial entities in Melbourne are currently offering the most “convenient” mortgage tax rate.
The ultimate cost of renting or buying may depend on your own personal and financial situation, but it also will depend on location. In remote locations, it can be more economical to buy rather than rent simply due to supply and demand. Where there are few rental properties available, rent prices can go through the roof. In larger cities, renting may be cheaper due to a lack of availability of properties for sale.
Factors such as timing and location can make a huge difference in the ultimate cost of renting or buying. By keeping all of these housing dynamics in mind, you can make the right decision for you and your family to live the Australian dream.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.