Are you in a dilemma of whether to buy a house or to rent it? Well, we know that feeling. To help you out in making your decision, we have weighed some advantages and disadvantages of buying a home and renting a home as well. Read on to understand them to make a feasible decision.
Renting a home
Advantages
It frees up your savings
All your savings are intact and safe by choosing to rent over ownership as you need not spend it over a deposit and the other costs of buying a home. Your savings are free for any different kind of investment or expenditure.
It gives you more flexibility
There is a lot of flexibility in renting. You can quickly relocate from one place to another and choose to stay in different areas as per your wish.
Allows you to diversify your investments
Your savings can be used extensively over a wide range of investments. By scattering and investing the money in different places will earn you more interest and would also be safe, as you will have a diversified investment portfolio.
Disadvantages
Renting may be more expensive
The cost of renting increases every year as the property rates go up. So, every time you renew your lease or take up a new house for lease, you will have to give the recent market price – a hiked rate.
No forced savings
In ownership, you would forcibly pay an amount as a mortgage, but in the case of renting, that is missing. But a mortgage is a forced saving, which you do towards an asset. This asset will increase in value over time. You miss the opportunity to save and earn from it.
Buying a house
Advantages
It gives you stability and freedom
Owning a home will give you certainty and security, as no landlord can ask you to vacate. You have all the freedom to decorate and utilize your home the way you want.
Rise in house prices over time
Home is an asset that increases in value over time. The cost of the house keeps on increasing every year as the market rate keeps growing. This is a long-term investment strategy.
You can use the equity in your home
You will have equity in your home, that is, the proportion of your home. You can use this equity amount to invest in funds, managed or shared funds too. This equity will rise as the home price rises.
Disadvantages
You’ll be paying interest
A significant amount of interest and fees are paid for lifelong in a home loan. Interest rates fluctuate, causing a rise and fall in monthly repayments.
There are opportunity costs
The amount invested in a home is an ‘opportunity cost’ or tied-up money that could have been used for other investments elsewhere.
Ownership costs are more than just a deposit and loan repayments.
Buying and selling a house is a costly affair. As per RBA – Reserve Bank of Australia, selling a house costs 4% of the selling price and advertising and agent fees. 6% of the buying cost is required for government fees, stamp duty, loan establishment fees, conveyancing fees, etc.
How to use a rent vs buy calculator?
Based on your financial capability, the calculator will help you in understanding and making a better choice between rent and buying. Just add the required details in the given slots. These values can be assumed values or actual values too. The calculator will run the program and do the rest for you. It will then give you the exact results.
The renting vs buying calculator is just to have an idea about the finances. But if you are looking out for a house to rent or buy on an immediate or serious basis and need thorough information regarding the same, you can contact us. Our financial experts will guide you through.
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Experienced Director with a demonstrated history of working in the accounting industry. Skilled in Tax Preparation, Self Managed Superannuation Funds (SMSF), Accounting, Income Tax, and Tax. Strong professional with a Master of Applied Finance focused in Taxation from University of Western Sydney.