What’s the difference, and what’s the best option?
Renting vs buying a home is a decision that many people face. Of course, just to make it difficult, both options have their pros and cons, and it ultimately comes down to your personal circumstances and priorities.
Renting a home can be a great option for those who are not ready to commit to a long-term house purchase. Renting has many pros including flexibility and mobility as tenants can typically move out with relatively short notice. On top of this, renters do not need to worry about maintenance or repairs, as those typically lie as a responsibility of the landlord.
On the flip side, buying a home can be a great investment, as house values (as we have seen in recent years) can appreciate over time. Additionally, owning a home allows you to customise and personalize your living space, really allowing you to make it your own. This means you can build equity, as you pay off your mortgage – win, win. Home ownership too, has the benefit of certainty that you may not have as a renter
Whilst this all sounds pretty hunky dory, buying a home also comes with certain responsibilities, such as maintaining and repairing the property, and paying property rates and insurances. On top of this, if you decide to move for whatever reason, selling a home can be a longer and more complex process than ending a rental lease.
If you’re in a position, trying to decide whether to rent or buy a home, it’s important to consider your financial situation, how long you plan to stay in the home and your lifestyle and priorities. If you’re not yet ready for the responsibilities and financial commitment that come with owning a home, renting may be a more attractive option. However, if you’re ready to invest in a home, and you plan to stay in the same area for a while, buying a house may be the better choice.
We’ve broken the above thought-starters down a little further, to help you out when weighing up your options:
- Assess your finances: (we know, noone loves this!) Before making a decision, it’s important to assess your financial situation and determine how much you can afford to spend on housing each month. Buying a home typically requires a larger down payment and closing costs, as well as ongoing expenses such as taxes and maintenance. Renting on the other hand, typically requires a smaller deposit, or bond, and the first month’s rent. Make sure you take into account all the costs associated with both options and determine which is best to work with your financial situation.
- Consider your lifestyle: Think about your lifestyle and how it may be impacted by the renting vs buying choice you make. Renting may be a better option if you value flexibility and mobility. However if you’re ready to settle down and put roots in a community, buying a home may be a better choice.
- Plan for the future: Consider your long-term plans and understand how renting or buying a home fits into them. Is buying a home really a priority to you if you’re planning on leaving on an OE next year?
- Take into account the hidden costs: Renting and buying both have hidden costs that you need to be aware of. For example, when renting you may need to pay for additional fees, such as application fees, or an extra deposit if you have a pet. When buying a home, you may need to consider a house inspection, appraisal, and so on.
- Do your research – (and don’t skimp on this one): Research the housing market in your area, and gather information on average home prices, rental rates and other housing-related costs. Keep your finger on the pulse when it comes to the property market and start to understand what you do and don’t want in a home if you plan to go down this route.
- Consult professionals: It’s always a good idea to seek advice from professionals such as mortgage advisers (we know a pretty good one ;)), real estate agents, or financial advisors. We can provide valuable insights into the pros and cons of renting vs buying and help you make a decision that’s right for you.
In summary, both renting and buying a home have their pros and cons, and what’s right for you will depend on your personal circumstances and priorities. If you think a chat with us for further advice may help you, pick up the phone and give us a bell, we’d love to chat. Let’ work together on carving a pathway to achieving your future goals.
While we’re home loan experts, our blog posts are for general information purposes only and are not intended as financial advice. If at any stage you need personalised advice, get in touch on 06 8788 4444 or Ben or Mark.
