Buy

Buy Vs Rent: Is it cheaper to buy?

If you are currently renting in the Whitsundays, then you may be surprised to hear that it may be cheaper for you to buy rather than to rent.

Firstly, everyone knows that rent money is ‘dead money.’ Dead money is money that you will never see again. If you currently pay $200 per week in rent, then you are paying over $10,000 per year in rent. If you are paying $300 per week in rent, then you are paying over $15,000 per year in rent. If you are paying $400 per week in rent, then you are paying over $20,000 per year in rent. Whereas if you purchase a property, this $20,000 per year will go towards paying off your own home and the money will be going towards your own asset, not towards paying off someone else’s mortgage.

There are many positives to owning your own home. The biggest one is the freedom that it gives you. Yeah you may have a home loan now, where you are locked in to paying your repayments every week. But what is the difference in renting? If you are renting then you still have to pay your rent every week and if you don’t pay your rent, you will be kicked out of the property. So no matter what, you still have to make repayments every week, so why not put those repayments into your own home?

Owning your own home means that you can make changes to the property whenever you like. Don’t like the wall colour? Get it painted. Don’t like the garden? Then rip it out and replace it. Want to hang a picture? Then bang a nail in the wall. You can personalise your own home any way that you want to.

Imagine never having to do a routine inspection ever again? And for those of you who are constantly moving from house to house (because let’s face it, when you are renting, you are lucky to find a house that you can settle down in for a long time) if you own your own home, you will NEVER have to worry about completing a bond clean ever again. You won’t even have to worry about paying a bond when you move in to a new property. Of course when owning your own home, you will come across some maintenance jobs that you will need to pay for yourself. This is always one reason why renting is great, because if something breaks down at the property, the owner is always in charge of fixing it. However, most properties have minimal maintenance issues with them throughout the year, and when you consider how much you are saving each week on rent, you will end up ahead. And wouldn’t you like the control of being able to get things fixed straight away? Rather than waiting for the owner to approve the maintenance request which could take ages.

So lets look at the figures to see why buying can be cheaper than renting…

At the time that this article was written, the cheapest property available for rent in Cannonvale is a two bedroom townhouse for $250 per week. If you were to pay $250 per week in rent for 30 years, which is the length of a standard home loan, you will end up paying $390,000 towards dead money. Whereas at the moment you can buy a two bedroom townhouse in Cannonvale for around $130,000, which would work out to be repayments of approximately $130 per week. This is according to the Loan Market repayment calculator shown below.

If you are looking for a three bedroom property, then at the time that this article was written, the cheapest three bedroom property available for rent in Cannonvale is a townhouse for $280 per week. If you were to pay $280 per week in rent for 30 years, which is the length of a standard home loan, you will end up paying $436,800 towards dead money. Whereas at the moment you can buy a three bedroom townhouse for around $220,000 which would work out to be repayments of approximately $240 per week. This is according to the Loan Market repayment calculator shown below.

Obviously home loan repayments vary depending on the bank you use, current interest rate, loan type, etc but this repayment calculator can be a great way to get a good idea of what your repayments could be.

REASONS WHY YOU SHOULD BUY YOUR OWN HOME

An asset for the family – If you own a home for your family then after you pass away, your home would be left with your family. So by owning a home you are investing in you and your family’s future. You are leaving an asset for your family.

Freedom –When you live in a rented property then you have to follow some rules and regulation of the landlord, if you do not follow the rules then you may be kicked out of their property but when you have your own home then you have all the freedom. Means you can do anything which you would like to have in your home like – you can paint your kid’s room any color you want, you can change your floors from carpet to wood, and you can put a new chandelier in the dining room without asking a landlord for permission. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange.

Force Savings- Owning a home not only is cheaper than renting, but it also forces you to save money at the same time. Your monthly payments are going towards equity that you can tap into for retirement, college expenses, etc. whereas rent just flies out the window.

Steady payments that won’t go up. – When you are paying the monthly EMIs of your home, then it is unlike the rent where the landlord can increase prices on a whim, with a fixed mortgage payment, you know exactly what to expect each month, and each year.

Privacy – For everyone privacy is the most important thing, but when you are living in a rented home then your privacy will be dependent, there’s a chance you share walls, ceilings or floors with noisy neighbors. Or maybe you want to be noisy but have to keep the volume down so as not to disturb your neighbors. Either way, home ownership is a preferable option if you want to turn up your music, enjoy some quiet time or if you value your living space as a private sanctuary.

Cost Control – Homeownership is more than just a financial transaction; it’s an act of putting down roots and establishing a lifestyle in a community you feel connected to. With renting, you have no control over whether the cost of rent goes up, pricing you out of your residence, or whether the property owner sells your apartment or house. With home ownership, you’re in the driver’s seat. You can establish a budget to account for your mortgage payment and can feel comfortable knowing that your home will remain yours.

Cost Savings – Being a homeowner often means a lower monthly payment. There are a variety of reasons for mortgage payments being lower than rent, but a major factor is that rental property owners typically have to inflate their own monthly costs in order to turn a profit. With homeownership, you’re not paying a premium to rent on top of a bank loan— you’re the owner of the base level mortgage, which means lower overall monthly costs.

Click here to check out our current listings for sale, to secure your own forever home.