Purchase House or rent a property can be tough. The white picket fence has long been considered the great Australian dream. But on the other hand, renting offers freedom and flexibility. So, what’s the best choice?
Put simply, there are pros and cons for both buying and renting a property. And what’s right for your personal situation won’t work for the next person. Here are a few things to consider when deciding whether buying or renting will work best for you.
Table of Contents
Buying a property
Pros of buying a property
Putting down roots on a property provides security and a direction in life. You can also personalise where you live, and over time, the repayments will bring you closer to home ownership. The property may also increase in value over the years, and you may also be able to use the equity in your home to invest in another property or pay for renovations.
Some people also like the discipline of regular mortgage repayments as a way of forced savings, with your savings paying off an asset you will eventually own outright. Part of the monthly repayment (the principal) is going towards paying off your own property, rather than your rental provider’s property.
Cons of Purchasing a property
To start with, you’ve got to save up for the deposit, which in the current market, can take years. You are also then locked in to covering the mortgage for years to come, which means that taking time out of the workforce for a holiday, for example, might not be an option available to you.
There’s also a range of other costs, including council rates, maintaining the property and repairs. There’s also no guarantee that your property will increase in value, depending on what and where you buy.
And if you get in over your head financially can be a major problem. If you can’t cover the mortgage every month, you risk the possibility of repossession by the bank.
Renting a property
Pros of renting a property
Renting can enable you to live in a neighbourhood you might not be able to afford to purchase in. It also provides greater flexibility to find a new rental if you need more space, or take a job on the other side of town and want to move closer to the office, for example.
Renting might be considered ‘dead money’ by some, but it’s also usually cheaper than buying, which means you could save some cash if you’re not paying more than you can really afford to.
Renters are also able to avoid all the other costs that come with property ownership, such as rates, insurance on the property and maintenance costs.
Cons of renting a property
But there are downsides of renting, too. You’re essentially paying off someone else’s mortgage, rather than your own. Once you’ve paid off your mortgage, you’re done and dusted. On the other hand, rental payments never end.
source: RACV
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