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Buying VS Renting

By Madeline Uto

The question of “should I rent or should I buy?” is a timeless dilemma. Below are a list of pros and cons that can help you make a more informed decision.

Renting – the pros

1. Freedom to relocate

As a tenant you have the freedom to chose what you do once your lease expires. At the end of a tenancy you can move from home to home, suburb to suburb. You may chose to move because you were offered a new job, to be closer to family or because you were seeking a fresh start. Whatever the reason, it is much easier to relocate as a tenant than it is to move as a homeowner.

2. More cash in your pocket today

If you’re fantasising about an extended holiday, considering future study or unwilling to give up your weekly retail-therapy, then opting to rent may be the appropriate choice for you. Besides the fact that mortgage repayments are likely to be more expensive then rental payments (according to the Australian Bureau of Statistics), buying a home also requires an equity deposit that is likely to take up majority (or all) of your savings. Therefore, if you are still considering investing or spending your money elsewhere, then it may be a good idea to stick to the rental market.

3. No maintenance

In a rental property, it is the landlord’s responsibility to remedy any general maintenance or repairs that arise at the property (unless the tenant has caused the damage themselves). This means you don’t have to worry about any unexpected costs that may arise due to property maintenance.

Renting – the cons

1. Limited gain

Unlike mortgage repayments, rental payments do not amortise, and unfortunately, there is no capital gain at the end of a tenancy. Whilst home owner’s may take 20-30 years to pay off their mortgage, at the end of their loan period they have full ownership of that property.

2. Renting can be unpredictable

Whilst you may have lived in a rental property for a number or years, or recently moved into your dream home, there is no certainty on when you might be asked to move on. If your landlord decides to sell, renovate or move into the property themselves, unfortunately this is likely to result in you needing to move at the end of your tenancy. Another uncertainty that comes with renting is fluctuations in rental prices. Once a current lease expires, landlord’s are aloud to increase the price of your rent. If these price increase do not fit your budget, you may need to relocate.

3. May not feel like your own

Some people find it difficult to feel like their in their own home when renting. You may be denied cosmetic changes or adding certain decorations to the property. On top of that, property managers and/or landlords come in and inspect the property. This lack of privacy and freedom can be restricting for some tenants.

Buying – the pros

1. Potential for future capital gain

History has shown that property-assets generally increase in value over time. Therefore, purchasing a property is essentially a type of forced saving. You are putting money towards an asset that is likely to increase in value over time, meaning you are likely to see capital gains in the future.

2. Peace of mind

Owning your own home means you can occupy it for as a long as you want, renovate when you please and decorate how you see fit. And, as long as you keep on top of your mortgage repayments, no one can unexpectedly ask you to vacate.

3. Control over repayments

When taking out a home loan you have the choice of a fixed, variable or split interest rate. Fixed-interest rate home loans will be subject to regular occurring payments that do not fluctuate over the loan period, whereas, variable and split rate home loans will see fluctuations in their interest repayments. All have their advantages and disadvantage, which home buyers get to decide on themselves.

Buying – the cons

1. Ongoing costs

Homeowners’s you are responsible for all ongoing expenses related to the property, including bills, maintenance, repairs and council rates. When considering these additional costs on top of the large initial cash outlays already made with an equity deposit plus your mortgage repayments, home ownership can quickly turn into a large financial burden.

2. Interest payments

Anyone taking our a mortgage must be prepared for the significant interest rate payments they will be making over the course of the loan, especially if they opt for a variable or split rate loan.

3. Possibility of decreased value

Not all properties increase in value over time, therefore, there is risk that you could lose money when you purchase a property. It is important to do your research and monitor market trends .

If you require any further assistance on this topic, feel free to contact us on (03) 5985 6855 or email reception on rye.vic@raywhite.com

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