You’ve done it! You have finally found a place to set down your roots.
The only decision you have to make is — buying a house vs renting a house, which is better?
It all comes down to your personal choice, including your financial situation. For one, you might need to think about home loan finance if you want to buy a house. Renting, on the other hand, is relatively stress-free than buying. However, it isn’t the same as settling down in a home you call your own.
The bottom line is, deciding between buying vs renting a home is easier said than done. This decision requires careful consideration as it will change the course of your life. Fortunately, both buying and renting have their unique pros and cons.
Let’s learn more about buying vs renting, which is better.
The Pros and Cons of Buying a House
Let’s start the buying vs renting a home debate by understanding the pros and cons of buying a house. The Australian property marketing is booming. According to recent data, new home sales in Australia increased to 3703 Units in February from 3518 Units in January 2024. In other words, this might be the right time to invest in your dream home.
However, there are a few advantages and disadvantages to doing so.
Pros of Buying a House
- Financial Investment: Buying a house is probably the biggest investment you will ever make. However, the value of your property can increase over time. It’s your chance to build equity and wealth over the years.
- Stability and Security: Owning a home provides a sense of security. You have control over your living space. You don’t have to worry about lease expiring or rent hikes.
- Freedom to Customise: Unlike a rented property, you can paint, decorate, and modify the house you own. You can change it to suit your taste and needs. And the best part is, you don’t have to ask your landlord to make these changes.
- Potential Tax Benefits: Homeowners in Australia might be eligible for various tax deductions. For one, you may be able to deduct the interest paid on your mortgage from your taxable income. Property tax deduction is another critical tax break many homeowners can enjoy.
- Government Incentives: Different government incentives are available for those looking to buy a new home, especially first-time homeowners. For instance, the First Home Owner Grant (FHOG) scheme offers a one-off grant to eligible first homeowners.
Cons of Buying a House
- High Upfront Costs: This is a major drawback of buying a house. These costs often go beyond your initial down payment or deposit. You will have to pay stamp duty, conveyancing costs, legal fees, inspection costs, and other government fees.
- Ownership Costs: These costs include expenses related to maintaining your property. That means you end up paying body corporate fees, council rates, water, electricity, home insurance, and property taxes. You are also responsible for all maintenance, including lawn care, roof repairs, HVAC system, electrical work, and plumbing. Additionally, you may have to pay for unexpected repairs like fixing a broken window or storm damage.
- Home Loan Finance: Home loan finance is yet another significant consideration. Most Aussies cannot afford to buy a home outright. You will need to get a home loan. Home loan finances are typically long-term debts (25–30 years). A significant portion of your income goes towards these payments.
The Pros and Cons of Renting a House
The buying vs renting debate leans towards renting if you value flexibility or can’t shoulder the financial commitment of owning. Of course, like buying, renting also comes with a few pros and cons.
Pros of Renting a House
- Flexibility: This is arguably the best benefit of renting a house. It’s easy to move homes if your job location changes when you rent a house.
- Fewer Financial Burdens: As a renter, you have to shoulder fewer financial burdens. The landlord is responsible for maintenance and repair. All you have to do is pay a fixed rent, so your monthly costs are predictable.
- Lower Upfront Costs: Renting doesn’t require high upfront costs like buying a house. You don’t have to worry about home loan finance or down payment. The deposit is usually two or three months’ worth of rent.
- Opportunity to Invest Elsewhere: You can invest the money saved from not making mortgage payments in other financial products. Investments like shares, managed funds, and exchange-traded funds (ETFs) might yield quicker or higher returns.
Cons of Renting a House
- Lack of Equity: When you buy a home, each mortgage payment builds equity in your property. However, rent payments go directly to the landlord. That means you are essentially paying for someone else’s mortgage.
- Rent Hikes: You will have to face annual rent hikes, which have soared recently. Rents across Australia have risen rapidly in at least 15 years, increasing by 10% in late 2022 and early 2023.
- Instability: Once your lease expires, the landlord may decide not to renew it. This forces you to move more frequently. It is not only inconvenient but also costly.
- No Customisations: You can’t customise the house to suit your taste and needs. If you want to make any changes, you will need permission from the landlord.
- Pet Restrictions: Some landlords may have a strict NO PETS policy. This might force you to rent a house that’s out of your budget.
- No Tax Benefits: Renting a property comes with zero tax benefits. Unlike mortgage payments, you cannot claim tax deductions on your rent payments.
Buying a House Vs Renting a House: Which Is Better
There is no way to settle the buying vs renting a home debate.
The final decision rests on:
- Your personal and family situation
- Your ability to shoulder the long-term financial commitment
- Your eligibility for home loan finance
- The type of properties available in your area
If you have a dream home in mind, we are here to help. My Money House specialises in home loan finance for new homes, investment properties, and refinancing.
Move into Your Dream Home
Buying vs renting a home isn’t a decision to be taken lightly. While the former helps build equity and offers stability, it comes with high upfront and ongoing costs. On the other hand, renting offers flexibility and lower initial costs but lacks equity, stability, and customisation. We recommend considering your financial health, career stability, and personal choices before you decide.
Need a loan for your dream home? My Money House has got you covered. We offer exclusive finance for new homes, investment properties, and refinancing – all under one roof. Call 1300 870 838 or fill out our online contact form today.
