It might be challenging to decide whether purchasing a home or renting one is better. The choice will be influenced by a variety of aspects that are specific to your current financial circumstances. These aspects include where you reside, the stability of your job, the amount of money you have saved for a deposit, the timing of the transaction, and when you believe it is a good moment to join the property market.
In the end, the option that will provide you with the most short-term financial savings while also enabling you to pursue your goal of home ownership should be the most suitable alternative for you to choose.
Buying a property
When you have a mortgage, you can see how the money you spend each month goes toward paying off something, regardless of how long or difficult the process may be. Unfortunately, things are seldom that straightforward, and saving enough for a deposit might seem like a Herculean challenge for a first-time house buyer, particularly if they have only been working for a few years. This is especially true for those who have just recently entered labor. If, on the other hand, the amount you would pay each month for a mortgage would be comparable to or even less than what you are presently spending on rent, purchasing a home can seem like an obvious choice. What are the benefits of buying a home vs renting?
Pros of buying
When you buy your first home, you are obtaining an asset that has the potential to increase in value over time. This allows you to reinvest the equity you have built via previous loan repayments and capital gains in more real estate or investments.
Greater stability and security
When renting, you are at the mercy of your landlord, who may decide to evict you after your lease ends or raise the rent to a no longer doable level within your budget. However, when you own your own home, you have far more control over your living situation and are not subject to the whims of your landlord.
Cons of Buying
Buying a home or other piece of real estate may be a very costly endeavor. To begin, there is the deposit, which, depending on the specifics of your situation, might be as much as twenty percent of the property's total worth. Then there is stamp duty, which may build up to a significant amount of money, particularly if you are a young person purchasing your first house.
When you find out how much more you have to pay for things like maintenance, strata fees if you live in an apartment complex, and council rates — all of which are the responsibility of the landlord if you're renting a property — you could be taken aback by the amount of money. All of these are in addition to your usual mortgage obligation, which, if interest rates continue to climb as they have over the previous six months, may cause each payment to cost you more money.
Renting a property
Because you essentially pay hundreds or even thousands of dollars every two weeks or month for the luxury of having a roof over your head, renting is sometimes called "dead money" or money wasted. On the other hand, renting may be beneficial if the cost of rent is lower than the estimated payment on a mortgage you want to take out. What are the advantages of renting vs buying a home?
Pros of renting
Renting a home is often more cost-effective than paying down a mortgage. However, there are exceptions to this rule, such as when interest rates are very low for a lengthy period. People who rent are often able to live in finer parts of the city than they would be able to if they had purchased their own home, although this depends on when and where they rent.
Not locked into a mortgage
Renting frees you from making any long-term financial commitments, allowing you to simply move on after the lease period is over, typically after a year but may be longer in certain cases. This provides more freedom and flexibility about finances in the immediate future.
Cons of renting
Lack of security
Because your landlord can kick you out anytime after your lease ends, renting only provides a limited sense of security.
No fixed price
Because your landlord can increase your rent after your lease term, you have very little pricing certainty or security. When there is a strong demand for rentals in your region, this might be a very sneaky practice to engage in.