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Renting or home ownership: Which option suits you?

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Renting vs buying a house, the debate is never-ending. While everyone faces this decision. Housing affordability has become a significant issue in Australia and working out whether to purchase your own home or continue renting can be a tricky decision. However, everyone is different, and you need to decide for yourself, which is the best option. Check out the pros and cons of both to get a better understanding of renting or buying before you make a decision.

RENTING

Renting is an agreement where a payment is made for the temporary use property owned by another person. By choosing to rent over owning a home, you do not need to spend your hard-earned savings on the deposit other costs associated with buying a home. This frees up more money to spend elsewhere. However, it is important that you think carefully about your investment goals and strategies, as owning a home can be more financially rewarding in the long-term.

Some believe that renting gives you flexibility. As a tenant, you can freely relocate from home to home and area to area once your lease expires. Furthermore, you don’t have to worry about selling the property when you want to move.

Some people, particularly new investors, so not want their savings tied up in a single investment. Therefore, renting allows you to use your savings across a broader range of investments. By diversifying your investments, will also work to spread out and therefore minimise out any potential risk.

While these are some good benefits, the cost of renting will steadily increase over the years due to inflation and rises in property prices. Sometimes your mortgage repayments may initially be higher than the cost of renting, but over time the interest charged reduces as the principal is paid off. This will leave you with more money to invest elsewhen in the long term as well as a good quality and relatively low-risk investment. Typically a mortgage is paid off within 30 years. After this, they are free of the large monthly payments and can happily live in their own home. Alternatively, a life of tenancy means that no matter what, you’ll always have rental payments to make. Once you hit retirement and your income is reduced, it may be difficult to find a large sum of money each month. This is an important consideration to be made.

BUYING A HOUSE

Alternatively, you may choose to purchase your own home. This can be great, as it gives you a significant level of stability and freedom. Owning your own home gives you the certainty that you will never be displaced by a landlord. Unfortunately, tenants have minimal control over how long they can occupy a rental property or whether or not they can make changes to the property. What’s great about living in your own home is that it is truly yours! You have the freedom to renovate and decorate your home as you please!

Another great benefit in owning your own home is the investment benefits. Generally, a property is an asset that will increase in value over time. Therefore, home ownership can be a long term investment strategy. Furthermore, you may even be able to use the equity of your home to fund another investment allowing your wealth to grow.

While a mortgage might sound scary, in many ways, it allows you to save more. You are obligated to pay your mortgage every month – putting money towards an asset that could potentially increase over time is greatly beneficial. In comparison, renting means that you might be tempted to spend spare cash rather than saving or investing it.

While these are some excellent benefits, there are other considerations that you will have to make. The interest and fees you pay over the life of a loan can be significant. As a homeowner, you must be prepared for interest rates to fluctuate. Furthermore, if you choose a life of renting, you’ll have the money you would have saved for a deposit to spend elsewhere. If this money is essential to you, you might find it hard to cover the initial costs of a mortgage.

As demonstrated by the information above, the decision to rent or buy is not easy and there are a lot of considerations you need to make before you make your final decision. You will need to consider a range of factors including financial resources, lifestyle, personal and family needs, investment goals and risks. Doing research and talking to an expert is a good idea. To receive expert advice, contact My Vantage today! We can provide you with the information you need to make your decision and can indicate how each option will impact on you! Furthermore, we can show you a range of incredibly affordable house and land packages which have never made home ownership so easy! Contact us today!

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