Is it cheaper to buy than rent?

With record low interest rates it begs the question: “Is now the time to stop renting and start buying?” 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.

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. Interestingly, one in three (32.9%) Australian suburbs recorded lower monthly mortgage repayments than rental payments for houses and almost 40% (37.7%) for apartments.1 

Does that mean it’s cheaper to buy than rent?

While repaying a mortgage could be definitely cheaper in some suburbs, in other parts of the nation it simply isn’t the case - which makes it impossible to say that renting is definitely cheaper than buying, or vice versa. A better option is to contact your local broker and get expert advice to find out if buying is cheaper than renting for you.

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Renting versus buying - pros and cons

The pros of renting

  • Allows you to live where you want
  • You don’t need a huge deposit to start renting
  • You can move as often as you like/need
  • You don’t have to pay for maintenance/repairs

The cons of renting

  • You’re spending money on something that isn’t yours
  • In a competitive market, landlords are able to increase rent as they wish
  • There’s no certainty around rental payments

Should you rent or buy your own home?

As a homeowner, your mortgage repayments might be higher than your rent, and yes, a home loan is a long term commitment. But in many ways, repaying a loan is a form of forced saving.

When renting, you can live where you want, and you don’t need a huge deposit. But when you buy, it's your asset which has the potential to grow in value. You’re not just paying for a roof over your head, you’re building equity in an asset that is likely to grow in value over the years.

Watch this video to find out more.

The pros of buying

  • You spend money on an asset that grows in value over time
  • Owning a home puts you in a good financial position for the future
  • You are able to make repairs, alterations to the property and truly make it your own
  • Interest rates are at historical lows
  • Australia’s lenders are aggressively competing for business – they want to finance your property dreams at a good interest rate

The cons of buying

  • Purchasing the property isn't the only expense - consider maintenance fees, bills, repairs and interest rates.
  • High property prices may force you to buy where you can afford and not ideally where you’d like to live
  • Costs associated with buying a property can be significant – Lenders Mortgage Insurance, solicitor’s fees, conveyancing fees, pest and building inspections
  • Buying a property requires a significant deposit, which may take years and considerable sacrifices

Get expert advice

The decision to buy or rent can be confusing. There are many different factors to consider including your financial resources, lifestyle, family needs, investment goals and even appetite for risk.

It's important that you do your research and to talk to an expert. Give your local Mortgage Broker a call today and they can help you determine the best course of action that is suitable for you and your needs.

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This article was originally published on 21 July 2020, and has since been updated.
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Purchasing your first property can be an overwhelming process and there may be steps you are unsure or unaware aware of. This guide will walk you through all of the steps involved in the buying process.

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