How much money can I borrow for a home loan?
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. While there are many benefits to buying property, there are still reasons why people prefer to rent.
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.
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.
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.
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.
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.
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.
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.
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.
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.