If you’re finding it tough to get into the property market, don’t be so hard on yourself. Australia is one of the most expensive places in the world to buy a house, and recent economic pressures haven’t helped the situation. If you’re unsure whether it’s better to rent or buy a house, weighing up the pros of both options is a great place to start.
The pros of renting
These days, more of us are renting, and while it might not be the choice for everyone, others enjoy the extra freedoms. For example:
- You might have heard people discussing the benefits of renting and investing vs buying. Rather than committing to monthly mortgage repayments or saving up for a deposit, renting allows you to invest your money elsewhere. Maybe it’s a new business venture, a share portfolio or upgrading to a new car.
- Renting can offer extra flexibility. If you like a change of scenery, you can move to a new place once your lease is up. This could be particularly appealing for growing families or people looking for a sea change.
- Most of your money isn’t tied up in the one asset. So, if something happens to the housing market, you might be less affected.
If you’re still wondering, is renting really a waste of money? The short answer is, of course not. You’ve got to live somewhere, and it could be a great option until you’re ready for the responsibility of owning a house.
Why buy a house? And is buying a house worth it?
For some of us, buying a home is a major life goal. And while renting might offer more freedom, buying a home can offer security. It’s a place your family might live one day and could also be a great investment for the future.
The pros of buying a home:
- Owning a home can provide more security. You get to decide when it’s time to pack up and move on.
- You have complete freedom in your own space, meaning you can make whatever changes you like. A fresh coat of paint, new carpet or even just hanging photo frames on the walls – it’s completely up to you.
- Since the mid 80s, house prices have risen almost every year so there is a good chance the value of your house will increase
- You could have equity. Think of equity as the value of your home minus how much you still owe the bank. Your loan repayments, for example, could be leveraged as equity to help fund other investments (like buying a second home).
- If you’re a first home buyer, you might be able to get government grants to help cover part of your deposit and stamp duty.
Pro tip: You can avoid paying Lenders Mortgage Insurance (LMI) by putting down a bigger deposit. At UBank, we don’t charge LMI because we only take deposits of at least 20%.
Is it cheaper to rent or buy a house?
It depends on how you look at it. Paying rent could be cheaper than making mortgage repayments, so you might not be paying as much upfront. But in the long run, owning a home could be a better investment as there is a good chance the value of your house will increase in the future. When renting, the only person who could make a profit is your landlord.
If buying a home isn’t possible just yet, don’t worry! Keep renting and save what you can. But if you’re thinking about starting your home loan journey now, we might be able to get you one step closer to owning your dream house. Check out our super simple online application form, here.
If you want to find out more about the financial differences between renting and buying, you can use estimators or set up a rent vs buy calculator on Excel to help you decide which option works best for you.