Perhaps it’s the age-old yearning for a piece of land to call your own, or maybe it’s the excitement of acting out your wildest Home Channel fantasies, but whatever the reason the desire to own a home has caused many to make the big move from renting to buying. Farewell grumpy landlord, hello mortgage! But is this move always the wisest? Here are some pros and cons you might want to weigh up before making the decision.
Counting the cost
So you’ve done the maths and you can scrape together enough every month to afford the mortgage. Just. Next step property pages? Not so quick. In addition to paying the mortgage each month, a home of your own also requires ongoing maintenance. What would happen if you needed to repair the roof? Or fix a burst pipe? In a rental, this would mean a call to your landlord or rental agent, but in your own home this means digging deeper into your pockets, and potentially deeper into debt.
Before starting the property search, make sure you’ve been pre-qualified for a bond by a reputable bond originator (Did we mention Rawson Finance?), and make room for unforeseen maintenance costs in your budget.
If your budget doesn’t stretch to accommodate potential leaky pipes and the odd paint job, renting may be a safer option until you can comfortably factor in home maintenance. Other than an annual increase, your monthly rent should remain steady, and any big maintenance issues will be your landlords problem.
Finding your financial feet
As you’ve probably realised from listening to your friends, family or the guy behind you in the grocery queue, most people are staunch advocates for buying property as soon as possible. After all, it makes a lot of financial sense, if you can afford it.
Rather than paying for rent, which you will never see again, some of the money you pay towards your bond will go towards building equity in your home. There is also the option to refinance your bond should you need to withdraw a large amount of money, which is always a useful card to have in your back pocket.
And then there’s the likelihood of the value of your home appreciating over time, which could earn you a handsome profit if you decide to sell. Who doesn’t want to make money while sleeping soundly under their own roof?
All of this makes the option of buying very appealing, but there are also financial advantages to renting too. In the first few years of home ownership, most of the money you put in goes towards paying interest, which means if you decide to sell after only a few years, you may have little or no equity in your property.
Then you also have to factor in the costs of selling a home, which could mean, if you sell early, you actually lose money in the sale. Ouch. Whereas with renting you can have the flexibility to move relatively easily and quickly, with little financial fallout. The bottom line: buying property usually only makes sense if you’re going to be in it for the long-term investment.
Living the lifestyle
Contrary to popular belief and possibly what your dad will tell you, there is more to the decision whether to rent or buy than purely the financial. These lifestyle factors are often the last ones taken into account, but they can have the biggest impact on your quality of life.
For example, what area do you want to live in? Do you want to be in the buzz of the city centre or out in the quiet of the suburbs? Is it important to be near certain schools or close to your work? You may be able to afford to rent in the area of your choice where you wouldn’t be able to afford to buy.
Then there’s customisation. Do you want to be able to choose paint colours, bathroom fittings, and have the option of adding an extra room or patio? Or would you rather not spend your weekends in Builder’s Warehouse? If you’re feeling the itch, and you have the energy, for some renovating, buying a home you can do up could be a clever way to add value to a property. But if you’d rather forgo the creative freedom for maintenance-free living, then renting may be better suited to you.
Finally, renting a place gives you a lot more freedom of movement whereas buying a home provides a sense of long term security. Is your five year plan to settle down and grow a garden? Or are you daydreaming about a trip around the world? There’s always the option to buy to let, which could provide a nice income wherever you are, but being a landlord comes with it’s own set of responsibilities.
If your head is swimming with all this information, we have good news for you. You don’t need to navigate these deep and sometimes murky waters alone. At Rawson, we provide a full service whether you’re buying or renting. Why not contact one of our agents to discuss your needs today?
