Getting off the rental bandwagon and buying your first home is an exciting step to make! There are plenty of pros and cons to home ownership and renting, but it’s your personal circumstances, future plans, goals and financial situation that should really guide your thinking. So, what are some of the pros and cons of renting and buying?
- If the value of the property rises or the rental market becomes more competitive, you may have to pay more rent, but if the market dips it’s unlikely that your landlord will reduce your rent
- Building maintenance is your landlord’s responsibility, but sometimes you can’t control when and if it happens
- Your rent is fixed for the term of the lease – usually 6 to 12 months
- You’re paying off someone else’s mortgage
- Your rent may be less than mortgage repayments, especially if you’re sharing a home
- You don’t have any certainty beyond the term of your rental agreement, and you can be asked to move out with only a few weeks’ notice
- You have limited options to personalise the property
- Generally you’re not locked into a long-term commitment, other than the term of your lease, and can move out at short notice
- If the value of your property rises, you’re more likely to make a profit if you sell, or you can use this equity to potentially buy another property
- You need to budget for maintenance and repairs, but you choose what to do and when
- If you choose a variable loan, your repayments may fluctuate – both rising and falling with interest rate changes, however you can have more certainty by fixing your home loan interest rate
- By paying your home loan down, you might gain equity and use this to buy another property in the future
- Your mortgage repayments might be more than a renter would pay, but you’re building equity in an asset
- The property is yours to live in as long as you want to
- Generally you can do anything you like with the décor and your property (subject to council/strata approval), and any improvements might enhance your lifestyle and increase your home’s value
- Home ownership can be a bigger commitment than renting
Remember, renting = saving
If you rent, you’re saving money on some of the ongoing expenses of running a property, such as water and council rates, repairs and other costs associated with buying a home including stamp duty and monthly interest on your repayments.
So it can be a good idea to use these savings to start building your deposit. Putting aside the amount of money you’d otherwise be paying on these expenses each month can help you get into the habit of saving and will also kick-start your information-gathering as you investigate the costs and other financial implications of home ownership.
In addition, being able to show a lender that you’ve been making regular rental payments
If you think you might be ready to dip your toe into the property market, an Aussie Broker can explain your options and the steps you might need to take.
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Take the next step to buying your first home
- Chapter One : Getting started
- Chapter Two : Your dream home
- Chapter Three : Money matters
- Chapter Four : Ways to purchase
- Chapter Five : Understanding interest rates
- Chapter Six : Understanding home loans
- Chapter Seven : Lending sources
- Chapter Eight : Getting your loan
- Chapter Nine : Choosing a home
- Chapter Ten : Steps to settlement