The great Australian dream is to buy a home. However, with home prices rising faster than incomes this dream is slipping out of reach for many Australians.
In fact, it is estimated that more than 30 percent of Australian’s rent as they feel that this is a cheaper than buying a home. But, is this the best option long-term?
Let’s look at the benefits and disadvantages of buying and renting. Then you can decide which is best for you.
What are the Benefits of Buying a Home?
Affordable home buying is possible if you do your research – Sure it’s cheaper to rent than buy a home in some suburbs. But not all suburbs are unaffordable. The key to buying an affordable home is to look for areas that are situated near higher-priced suburbs, as these areas are often more affordable to buy in. Over time, homes in these suburbs typically increase in value, which means if you’ve bought here you’ll make a good return on your initial investment at a later date.
Buying may be cheaper than renting – If you’ve saved a good sized deposit, then you may even find that your home repayments are less than the rent that you were paying previously. In addition, your own home is an asset that typically grows in value over the years that you own it. For instance, you may purchase your home for $250,000 and in 10 years time it could be worth $350,000. This means that you’ve accumulated $100,000 in capital value since you bought your home.
You make your home an extension of your own style – Buying your own home means that you can do what you want to your home when you want. If you have the urge to renovate the property you can, you don’t have to ask anyone’s permission. This means you can paint the rooms in your home different colours, you can put in new carpet when old one becomes worn and you can upgrade your kitchen. You can put your own creativity into your home and make it yours.
What are the Downfalls of Buying a Home?
It takes time to save a deposit – You’ll have to save a deposit to buy a home, and this may take you months, even years, depending on the amount you wish to borrow. For many people this can be frustrating, especially if you don’t have a great deal of patience. However, the key to saving a deposit is to set yourself a budget and to then stick to this. Know how much you can afford to save weekly and then set yourself goals. For instance, aim to save $10,000 in 6 months. When you reach this milestone reward yourself, then set yourself a new target. You’ll be surprised at how quickly you’ll save.
You’ll be responsible for all costs associated with your home – When you rent, your landlord pays for the costs incurred by the property you live in. This includes the stamp duty to purchase the property, the mortgage repayments, building insurance, council rates, water connection costs, as well as the Emergency and Murray River Levies. So when you buy a home you’ll have to pay these additional costs, which can cost thousands.
Repairs and property maintenance are your responsibility – When you buy your own home, you’ll be responsible for any repairs and property maintenance. Sure you can hire someone to do these for you, but you’ll have to bear the costs. Alternatively, you don’t have to worry about carrying out repairs and maintenance, but if you elect to do this then you may find that the value of your property depreciates, rather than appreciates due to its condition. A well cared for home is usually snapped-up when put on the market and typically sells for more than one that is run-down.
What are the Advantages of Renting?
There’s greater flexibility – You can move when you want and without a great deal of stress. Therefore, if you need to relocate due to work or personal reasons you can do so by simply giving notice to your landlord.
You have a greater choice of property types and features – You can rent in locations that you wouldn’t normally be able to afford to buy a home in. You may even be able to rent a property that has features that you couldn’t afford in a home. For instance, some strata units have gyms, pools, tennis courts and other facilities and they are close to the city and to amenities.
The landlord is responsible for the property – You don’t have to worry about carrying out repairs and maintenance on the property, your landlord should do this for you. In addition, the cost of any maintenance is taken care of by your landlord.
What are the Drawbacks of Renting?
Your landlord can ask you to move – Sure renting gives you freedom and flexibility, but your landlord can ask you to move out without having to give you much notice, or a reason. This can make you feel displaced and unsettled.
You cannot make changes to the property – You’ll need to ask your landlord if you can make changes to the property before you can carry out any changes. This includes hanging pictures on the walls or painting rooms.
Repairs and maintenance may take time – You will have to notify the landlord of any issues with the property that need fixing, such as problems with plumbing or electrical work. Some landlords will rectify problems as soon as they know about them, while others can take much longer to get around to fixing problems. This can be frustrating, and at times, can affect your quality of life.
Are you seeking to buy a home? If you said YES, then contact eChoice, we can help YOU find an affordable home loan.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!