According to a 2016 census, as much as 67% of the population are homeowners. That’s not surprising as most Australians dream of owning their own home.
However, for some, it is not possible and others need to choose between buying a house and being a life-long renter. It can seem like a difficult decision, you need to consider all your options carefully.
Of course, if you’re lucky enough to win a house in, say, the Surf Life Saving Australia lottery, then the decision ends up being made for you. After all, you’ll have a home without having to spend anything other than a few dollars on a ticket.
The most obvious benefit of buying a house is that one day you’ll own it. At this point, you will no longer need to pay rent or a mortgage. Your available capital will instantly improve, allowing you to boost retirement savings and potentially enjoy a higher quality of life.
Of course, owning your own home also means that it can’t be taken away, that’s financial and emotional security.
Don’t confuse financial security with value. Most people expect the value of a home to increase. However, there is no guarantee of this. Financial security means you have a roof over your head without having to pay for it monthly. It doesn’t mean you’ll be able to move or afford the retirement you have always dreamed of.
It should be noted that the cost of a mortgage is often cheaper than renting. However, when you own the property you will need to spend on maintenance. Alongside this, many people like to improve the look of their home. This all costs money.
In short, while the mortgage is likely to be less than the rent, the cost of looking after your home is significantly more. When you rent the landlord needs to take care of all the repairs and maintenance.
Renting means you have more control over your costs and expenditure, there are no unpleasant surprises.
Of course, it’s not all plain sailing when renting. You will have regular rent reviews and little control over how much the rent is increased by; that can affect your budgeting and the increases can be surprisingly steep if you are living in a popular area.
If you’re purchasing a house then you should be prepared to stay in it for at least the next five years. Staying anything less makes it hard to sell it for enough to cover your fees of buying and selling. The property probably won’t have increased that much in value in a couple of years.
If you’re only planning on staying somewhere for a short while, renting is a better option.
The Bottom Line
There are long term financial benefits to purchasing a property. However, as these are long term you need to think carefully before committing to buying, it simply may not be the best time for you. There is nothing wrong with being a life-long renter.
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