Part 2: Why Pay Off Someone Else’s Mortgage?
Have you ever considered whether the money you’re forking out for rent each week could be put to much better use by paying off your own home instead?
A 2013 a study conducted by RP Data discovered that there are as many as 71 suburbs in Brisbane alone where it’s already cheaper to buy a home than rent one. Nationwide, this figure exceeds 2,500.
This means now could be the perfect time for you to stop paying off someone else’s mortgage and start establishing a property portfolio of your own.
Deciding to buy your first home isn’t just the first step down a path of financial success – through careful consideration and with the right advice – it can become a giant leap towards setting yourself and your family up for life.
Not every first home buyer is going to unearth a hidden gem and make a fortune overnight. Home ownership is a big commitment, but as the sayings go, good things take time and they come to those who are prepared to wait.
Just as the average income rises annually, unfortunately so too does the cost of renting. So while your employer is adding some extra cash to your paycheck each week, your landlord is likely to have their hand out asking for more too.
An article on realestate.com.au excellently explains how purchasing a home and securing your weekly mortgage commitments, could eventually cost you less than half of the amount required to rent. In the short term you may need Mortgage Choice to help you re-jig your budget to free up extra funds, but in the long run you could end up saving hundreds each week.
For example, the mortgage repayments on a $450,000 loan at 5.5% for 25 years equate to $637 per week, while rent on a home of the same value may initially cost $450. At first glance, buying the home leaves you $187 out of pocket each week.
However, if we factor in a 5% rental increase each year (in line with market trends), in 10 years the rental cost would have already reached nearly $700.
The following table outlines the difference in weekly commitments according to the scenario above:
Of course, every situation is different, but focusing on the bigger picture rather than adopting a shortsighted approach can help prospective first home buyers understand the enormous benefits owning a home can bring.
If you’d like the chance to discuss your current situation and how you might be able to buy a home for cheaper than you can rent one, give us a call on 3366 8604.
Do you want to save money sooner?
At the start of this article we mentioned that in many regions it’s possible to benefit immediately through buying as opposed to renting.
Using median monthly rents versus median monthly repayment estimates as a guide, a geographically wide range of suburbs found themselves on the list.
Buyers in the market for a unit should consider looking at:
- Spring Hill
- Brisbane City
- Mt Gravatt.
Those looking for a house may find their repayments are less than rent in (among others):
RP Data’s website provides a link to the full list, while Mortgage Choice Inner North Brisbane can provide expert advice and access to hundreds of loan products to help make your property ownership goals a reality.
Keep visiting our blog because in the next edition of this series we'll provide expert tips on the regions predicted to boom in 2014.
As always, we’re happy to answer any of your questions and will tailor our friendly service to fit your specific situation and needs. Just give us a call on 3366 8604. And remember to ‘like’ us on Facebook.