Article

Renting vs. buying property

Deciding whether to buy property, and give up the rental game is a big decision, and one that comes with a lot of thought and research.

Young woman looking at savings plan on computer

If you've saved a house deposit, or are on your way, you may find yourself sitting on the fence about when is the best time to purchase (if at all). While there are many benefits to buying property, there are still reasons why people prefer to rent. We've put together some pros and cons to get you thinking.

Renting pros

Flexibility

Renters have the flexibility to relocate easily at the end of a lease. While relocation is relatively easier for renters, it’s important to remember everything involved with moving, such as finding a new rental property, moving costs, bond cleaning costs and effort, and your personal time.

Money availability

Because your money is not going towards paying interest, or offsetting interest, your saved money will be more readily available to you. Depending on your current situation this can help pay for things like travel, education, and business expenses. However, it also means there is no real ‘forced’ savings, so it’s important to create a budget and stick to it to ensure you are still able to save money for the future.

Renting cons

Cost of renting

The cost of renting overtime adds up, and it is also ongoing. While paying off a mortgage means you are paying interest, it also means your repayments will generally decrease over-time, as your principal is paid off.

Less pressure to save

Renting means there is no real forced reason to save. You may be a good saver and have regular savings set up. However, for some people the temptation to spend available money means reaching a savings goal is not easy. If you are paying off a mortgage you are required to pay this amount every month, which goes towards paying off the principal of the loan.

Buying pros

Stability and freedom to personalise

Buying your own home gives you the ability to set up roots and personalise your space to suit you. Renters generally have little confidence about how long they can stay in a rental home, beyond a tenancy agreement.

Investment opportunities

Buying a house means you are investing your money in property. A home is an investment, and as house prices rise over time it means your money is working for you. It’s important to remember there are times of weak growth and falls in value, so the investment really is a long-term strategy.

Equity

Having equity in your property means the difference between the value of the property and how much you owe on it. Equity can be used to increase your loan for things such as renovations, upgrading to a more valuable property, or to purchase an investment property.

Buying cons

Interest

The interest you pay over the life of a loan can be significant. It’s important to understand that interest rates change, which will have a direct impact on your repayments if you have a variable loan, or at the end of a fixed loan period.

Available savings

As a renter, money you would have used to put a deposit on a house and pay it off, will be available for you to spend. While the money could be spent on lifestyle choices such as travel and education, it could also be used on other types of investments which may offer a greater yield, or quicker return than property.

Ongoing costs

As a property owner, you will have various ongoing costs. These can include council rates, regular upkeep such as pest control, general upkeep such as painting, or unforeseen costs such as a broken hot water system. As a renter, most maintenance costs are covered by your landlord. Take a look at our home loan calculator which helps you understand the real cost of owning a property.

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