Record low interest rates have continued to beg the “question is now the time to buy?”
For many Australians, renting may appear to be the most affordable choice, however low interest rates are making mortgage repayments now more affordable than ever.
Consider this; say you currently spend $600 a week on rent, if you were to contribute the same amount of money towards a mortgage, you would be paying off a home loan of approximately $500,000 with an interest rate of 4% p.a.
Renting is a great option for those seeking flexibility & short term security for their current financial situation.
With the benefit of having a landlord cover maintenance and repair costs, tenants often have the financial freedom to spend their money elsewhere. Additionally, tenants may often enjoy having the option to leave their rental property should it no longer suit their lifestyle needs.
While renting allows flexibility and financial freedom, it also presents a few challenges. This includes design restrictions and limited control over rental costs such as unforeseen increases in rental and utilities. Additionally, finding a rental property suitable to your lifestyle and family size can also be a major challenge.
The biggest hurdle with renting is that the money you spend on your accommodation is then gone forever. Often deemed as ‘dead money', renting doesn't provide you with an asset to set you up or with a home to eventually live in during retirement. And unlike a mortgage, once the rent is paid, you're unable to use that money (or equity) to reinvest in the future.
Choosing to purchase a home presents a series of advantages, including the freedom to make home improvements, and the ability to own an asset that will undoubtedly grow in value over time. Choosing to purchase a home can also be a beneficial decision long term. Depending on your current lifestyle needs, owning a home also allows the option for it to be used as an investment purchase.
While purchasing a home can be highly rewarding, the disadvantages associated with buying a property can also prove to be a challenge. For many Australians, the savings needed for a deposit to obtain a home loan is often the major challenge. Costs for home repairs, maintenance and any additional household expenses are also important factors to consider before deciding whether to purchase a home.
Perhaps rentvesting is the option for you?
There is a new trend sweeping the Australian property market. Known as rentvesting, it's giving home buyers the chance to own property they can afford, but continue to live where they want. Find out more about rentvesting.
If you are a renter and have been thinking of buying, now may be the right time to do so. Of course, before making any major financial decisions, it is important to sit down with your local Mortgage Choice broker and determine the best course of action.