Buying vs. Renting

Buying a home is one of the most rewarding and satisfying things you will ever do. Your home will most likely be one of your biggest assets, and the biggest debt. Before you take on the challenge of owning a home, you need to make sure that you're clear about why want to own a home.

There are a number of factors you must consider when you are making this decision. Owning and renting are both great for their own reasons, read on to find out which option is right for you.

Buying


Pros

  • Equity - House prices usually go up. Even if your house price doesn't go up immediately, it will go up sooner or later. While you own your house and pay down your mortgage, you are also slowly building equity on your house. You can potentially use this equity to buy another property!
  • Freedom - Owning your own home gives you freedom to renovate your house to turn it into what you want. Don't like how the kitchen looks? If you own your home, you can change it!
  • Stable payments - If you choose to go with a fixed-rate mortgage, your repayments will remain the same for the duration you have fixed it for (note, the fixed term is not the loan term. If you fix for 2 years on a 30 year loan, your repayments will be constant for 2 years, not 30). No more worrying about your landlord increasing the rent.

Cons

  • Maintenance - Keeping a house spick and span is not an easy task, it requires a lot of effort, and sometimes a lot of money. You have to mow the lawns or pay someone to mow them!
  • Rates - When you own a property you have to pay taxes to your local council - how much you pay depends on how much your house is worth. If you own a townhouse or an apartment you will even have to pay a body corporate.
  • Cash investment - Buying a house requires a big upfront investment. For banks to give you a home loan you must also invest your own money into it.

If you want to calculate how much your repayments will be, use our repayment calculator.

Renting

Despite the fact that you aren't building your net worth and equity, renting is still a great choice for some people as it offers freedom and flexibility that you don't get from owning.


Pros

  • Freedom - Since you dont own your house, you can easily relocate to another house, or even another city! You dont have to worry about selling your house or finding tenants. You can be spontaneous!
  • No maintenance - If something goes wrong with your house you can usually get your landlord or property manager to deal with it while you're out shopping!
  • Cheaper - In most cases renting is usually cheaper than paying a mortgage. You also don't have to worry about council rates!

Cons

  • No equity - You are paying rent every week but at the end of the day you don't own anything - you are essentially paying someone else's mortgage off.
  • Can't renovate - If you don't like something in your rental property you are out of luck, you are usually not allowed to redecorate. But if your landlord agrees, you could share costs!
  • Uncertainty - While you have the freedom of moving out when you want, your landlord also enjoys the same freedom. He can choose to sell the house or renovate, and ask you to leave.

If you want to calculate how much you can borrow with the rent you are paying, use our repayment calculator.