A Housing Question: Should You Rent or Buy?
The Australian housing market - for many, it’s a phrase that conjures up feelings of confusion and even fear. With tough economic conditions, it can be hard to decide whether to buy or rent a home. With so many people grappling with this life-altering decision, knowing the pros and cons of each choice can make things easier. If you are having trouble deciding which housing option is best for you, here is some information that could be helpful.
To Buy – The Pros
Most people dream of buying their own home, and for good reason. Being a homeowner can bring you:
- Equity: Although the initial outlay may be higher when buying, over time as you gradually pay your mortgage off, you will end up with equity in that property. The more equity you have, the more money ends up in your pocket when you sell or remortgage.
- A More Secure Financial Future: Owning your own home also makes it easier to borrow money. Banks and lenders prefer to lend to homeowners because they can be a more reliable investment than someone who rents.
- A Way to Supplement Your Income: Whether you rent all of your home or just a single room, you can earn an extra income.
- The Ability to Make It Your Own: Do you want to carry out some DIY projects and home improvements? No problem – you can paint those walls whatever colour you like. In a rental, you’ll need to check with the landlord before you do anything that changes the property.
To Buy – The Cons
Although the dream of owning a house can seem like the most important one, there can be issues. If you buy a home, you:
- Could Lose Money: Just as you can make money by buying property, you can also lose it. Equity doesn’t automatically mean you’ve made a profit if you have borrowed against the home, or if house prices in your area have gone down. In the worst cases, you can find yourself in negative equity, and stuck in a property that you don't want to live in any longer.
- Are Responsible for Upkeep: When you own a home, you are responsible for every element of repair and maintenance, which is usually not the case with a rental property.
Will Have Extra Expenses: You could end up with more money problems – the upfront costs. Although there are some upfront costs when you rent, they are just a fraction of the cost of buying.
To Rent – The Pros
Renting is how many people start when they first move out of their parent's place, but it also could be the best way to live because:
- There is less initial outlay. Renting is less expensive than buying when it comes to the upfront fees. When you rent a property, you will usually need to pay 4 weeks rent as a bond, and then 2 weeks rent.
- You won't have any maintenance costs. Another bonus of renting is that your landlord is usually the one who will carry out any repairs – at no cost to you.
- It's easier to move on. Renting makes relocating much easier. If you have to live elsewhere due to work or family, or just because you want to try somewhere else or need a bigger or smaller property, you can give your notice and move on once your lease coming to an end.
It can be less stressful. If the housing market rises or falls, it makes no difference to you, which is one less thing to worry about. And it is generally easier to rent a property with poor credit than it is to get a mortgage.
To Rent – The Cons
Renting isn't for everyone. You need to consider these downsides before you sign on the dotted line:
- You won't make any money. One of the biggest issues people face when renting a property rather than buying one is that, although they are spending a big chunk of money every month, when it’s time to move on, they won’t have made a penny.
- The rent could increase. Once the current lease expires, your landlord could put the rent up – and continue to do so year on year, depending on the market. This can mean having to move out because the rent is no longer affordable.
- You may have an insecure future. It can be an uncertain way to live since your landlord could put the place up for sale, raise the rent, or simply not give you the option to renew your lease.
Finding a rental specialist can help you make this all-important decision. An expert can help you weigh all the pros and cons and help you make the best decision for you. Not everyone should rent and not everyone should own a home, so take your time to choose your best housing option.