Home ownership vs. renting – a big decision !

Exciting!  You’re thinking about buying your first home.

Chances are, you’re excited, unsure and maybe a little apprehensive about becoming a homeowner. Buying your first home is a major life event. It brings lots of benefits, and also significant responsibilities, and it’s essential that you are ready to take this important step – both from a financial and lifestyle perspective.

Renting VS Buying calculator

With this in mind, let’s check out some of the pluses and negatives of renting compared to owning your home.

Things to consider

RENT OWN
If the value of the property rises, you may have to pay more in rent If the value of the property rises, the value of your personal wealth should also increase and you’re more likely to make a profit if you sell it
Building maintenance is your landlord’s responsibility You need to budget for building maintenance and repairs
Your rent is fixed for the term of the lease – usually 6 to 12 months Your repayments may fluctuate – both rising and falling with interest rate changes, however this exposure can be reduced by fixing your home loan interest rate
You’re paying off someone else’s mortgage Your property is likely to be an appreciating asset especially over the long term, and it could even be used as an investment property in the future
Your monthly rent payment may be less than mortgage repayments, especially if you’re sharing Your mortgage repayments may be more than the rent you could pay to live in the same area but paying off a home loan is a form of saving as you are building equity in a valuable asset
You don’t have any certainty of tenancy control beyond the term of your rental agreement The property is yours to live in as long as you want to
You have extremely limited options to personalise the property Generally you can do anything you like with the décor and outdoor areas (subject to council approval), and any improvements are likely to enhance your lifestyle and increase your home’s value
Generally you’re not locked into a long-term commitment, other than the term of your lease, and can move out at short notice It can take longer to sell a property, so you have less freedom to move

 

Renting isn’t always the cheaper option

Renting is generally regarded as a cheaper option than owning your home but that’s not always the case. It’s worth investigating to see if you could save money by owning rather than renting.

If you decide to buy a property

Purchasing a first home is one of the most exciting steps we can take. It may seem like a complex process, especially for first-timers however plenty of help and support is available from your eFinance Home Loans Mortgage Broker, and the result is certainly worthwhile. A well-chosen property should rise in value over the time while the balance of your home loan will steadily reduce as you make principal repayments. It may be hard to imagine it now, but one day your home will be paid off completely and you can enjoy life without a mortgage or paying rent.

Property Buying calculator

What if…you can’t afford to buy on your own, can you buy with someone else?

If you can’t afford to buy a property on your own, you might be thinking about buying a home in partnership with a friend or relative. It’s known as ‘co-borrowing’ and it’s a small but growing trend.

Here too there are a number of things to consider:

By combining your resources, you and your co-borrower(s) are likely to have greater ‘buying power’, and this may give you access to a greater range of properties or better quality homes

It can be quicker to raise a deposit, and you may be able to put down a larger buying deposit

It may be easier to meet the repayments with two salaries, which gives you both a bit more flexibility

It’s important to note that even if both parties are eligible for the First Home Owner Grant, only one Grant will be received

The key to success is having a strong relationship with your co-borrower, planning ahead for how you will share the rewards and costs of owning a home, and have a legally-binding contract drawn up to address all these issues – even if you are ‘going in’ with a family member.

This contract needs to cover things like:

Maintenance

Payment for damage or renovations

What happens if one co-owner wants to sell up further down the track?

A contract is also essential because if one person defaults on a loan payment, the other person is often liable. And the default can occur because of something as simple as losing a job or becoming too ill to work.

A contract also becomes critical if there is a breakdown in the relationship and one of the parties decides to opt out.

So seek legal advice and make sure you’ve got all the key elements covered if you’re thinking of co-borrowing.

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First time buyer guides

Are you a first home buyer intrigued by the Federal Government’s new First Home Super Saver Scheme? Well the good news is it’s designed to help individuals like you achieve your home ownership dreams.

Whether you’re a young individual saving away your money for a first home loan deposit or have simply spent too many years renting while paying off your landlord’s mortgage, we’ll run you through how this new scheme can help you get a foot in the property door sooner rather than later…

http://www.revenue.nsw.gov.au/grants/fhog

http://www.firsthome.gov.au/

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