Moving from renting to owning
Which is better: renting or owning?
There are advantages and disadvantages to both owning and renting. But ultimately, the decision will come down to your individual circumstances.
Here are some things to consider:
| Rent |
Own |
| If the value of the property rises, you may have to pay more in rent |
If the value of the property rises, you're likely to make a profit if you sell it |
| Building maintenance is your landlord's responsibility |
You need to budget for building maintenance |
| Your rent is fixed for a relatively long period of time |
Your repayments may fluctuate with interest rate changes |
| You're paying off someone else's mortgage |
Your property is likely to be an appreciating asset—and could become an investment property in the future |
| Your monthly rent payment may be less than mortgage repayments, especially if you're sharing |
Your mortgage repayments may be more than your rent—but you can also view this as a form of saving |
| You don't have any control beyond the term of your rental agreement |
The property is yours to live in as long as you want to |
| You're limited in the changes you can make to the property |
Generally you can do anything you like with the décor and outdoor areas |
| Generally you're not locked into a long-term commitment, and can move out at short notice |
It takes longer to sell a property, so you have less freedom to move |
| Someone else owns the property |
It's a place of your own |
Purchasing your first home is one of the most exciting things most people do. It's also a complex process, especially for first-timers. But the result is
invariably worth it, and if the value of your property rises, you'll have a valuable appreciating asset on your hands.
Should you buy with someone else?
If you can't afford to buy your own home, you might be thinking about buying a house or apartment with a friend or relative. It's known as 'co-borrowing'
and it's a small but growing trend.
Things to consider in relation to co-borrowing:
- Your 'buying power' may be higher with more than one person involved and may give you access to a greater range of properties.
- It can be quicker to raise a deposit, and you may be able to put down a larger deposit.
- It may be easier to meet the repayments with two salaries, which gives you both a bit more flexibility.
- Important to note that even if both parties are eligible for the First Home Owners Grant, only one can be used.
The key to success is having a strong relationship with the other person, an equal 50/50 share in the property, and a legally-binding contract—even if you
are 'going in' with a family member.
This contract needs to cover things like:
- Maintenance
- Payment for damage
- Capital gains liability
A contract is also essential because if one person defaults on a loan payment, the other person is often liable. And the default can be innocuous: it
could come from someone losing a job or their income from investments, or becoming too ill to work. A contract also becomes critical if there is a breakdown
in the partnership and one of the parties decides to opt out.
So seek legal advice and make sure you've got all the key elements covered if you're thinking of co-borrowing.
Continue to information about saving and your deposit.