Buying a house or renting which is better?

When entering the housing market, many are asking themselves: Should I rent or buy a house? If you’re in this position, you should be aware that there are benefits to both renting and buying. 

There’s no one-size-fits-all answer to this question. It all depends on your finances and personal goals. Often, it’s ideal to seek financial advice from a professional. But it’s also good to get a background understanding of the topic.

To help you figure out the most suitable option, we’ve broken down the pros and cons involved with renting a house and buying property. 

What is involved in buying a house? 

There’s a lot of work that goes into buying a property. You need to save for a deposit, get pre-approved for a home loan, find the ideal home, make an offer, do the necessary inspections, negotiate with the seller, navigate the settlement process, and handle the legal aspects of the property purchase. 

Buying a home is a commitment that usually comes with a 30-year mortgage. To those who want to own a property, the benefits of homeownership may outweigh the cons. To ensure a smooth and successful home purchase, it's important to know what you’re getting into and prepare accordingly. 

Buying a house: Pros & Cons 

For those who dream of homeownership, the main draw is usually the freedom and stability that comes with it. When you own a home, you’re free to do whatever you want with it without a landlord’s rules and restrictions.

Other benefits of owning a house include: 

• A property is often an appreciating asset, which means it could gain value over time. 
• You can build home equity, a powerful tool to have at your disposal that you can use to buy another property, use for renovation, or grow wealth through investments. 
• You don’t have to worry about unpredictable rent hikes. If you have a fixed-rate mortgage, you’ll have predictable housing costs. 

Buying a home does have its downsides, with high property costs being the biggest hurdle. Upfront costs vary depending on where you’re buying a house, but they’re often much higher compared to renting a property. Aside from the house purchase price, you need to consider the deposit and ongoing fees, as well.

Some drawbacks of buying a house include: 

• Being a homeowner means you can’t just up and move houses as easily as you would if you were just renting. 
• A mortgage is a bigger responsibility than rent. 
• You’re on the hook for maintenance expenses. 

When is buying a house ideal? 

If you’re looking to settle down and stay in a certain place permanently, buying a home may be more ideal (given that your finances allow it). Instead of making rent payments to your landlord, you could make mortgage payments that go towards homeownership. 

What is involved in renting a house? 

When renting a property, you’re expected to submit a rental application form, put down a bond or security deposit, and sign a lease agreement. The process has fewer steps and is much less expensive compared to buying a house.  

As a renter, your house payments will go to your landlord. However, rent costs are sometimes much more affordable than home loan payments. Understanding your personal and financial goals is important when deciding whether it’s best to continue renting or make moves to become a homeowner. 

Renting a house: Pros & Cons 

Affordability is the main draw of renting a house. Renting is sometimes a cheaper option, especially for those who want to live in and around the CBD, where living costs are highest. But some prefer renting because it’s less responsibility and there’s more freedom of movement if they want to move locations.

A few advantages of renting a house include: 

• The barrier to entry is much lower because of the lower upfront costs. 
• Finding a rental is can be as you can be more flexible in terms of where to live compared to buying a house. 
• Renting is less of a commitment, depending on the circumstances, and you can sometimes spread the costs with housemates. 

The biggest disadvantage of renting is that your rent payments aren’t going towards a specific asset. When you buy a home, the home loan repayments go towards you eventually owning your home. There’s no asset growth in renting.

Other drawbacks to renting include: 

• There’s less security or certainty in renting, as your lease can end at the landlord’s discretion. 
• The property isn’t yours, so you can’t make any improvements or renovations without permission. 
• You have to deal with inspections and landlord/agent requests. 

When is renting more ideal? 

For people who like to move around or don’t need as much security, renting can be ideal. When renting, you don’t need to commit to a 30-year mortgage like you do when buying a house, nor do you have to pay tens of thousands for a deposit. 

At the end of the lease, you can choose to renew it or simply move to a different property. This can also make it less restrictive, as you can sometimes select from a greater range of properties in lots of different areas when renting. But there are downsides to this. 

Consider your finances carefully 

Always think about your financial capabilities before jumping into the real estate market. Homeownership may align with your personal goals, but if your finances can’t handle the cost of a home loan plus the additional upfront and ongoing fees that come with it, then it may not be the right time for you to buy a home. 

Look into your home finance options with loans.com.au  

If you’re ready to take the plunge and move from renting to homeownership, then you’ll need affordable mortgage repayments. After all, more than 1.5 million Aussies are currently experiencing mortgage stress, which is when 30% or more of their take-home pay is spent on paying household bills. 

To avoid spending so much on your home, a home loan with a competitive interest rate and low ongoing fees is crucial. At loans.com.au, we offer a range of home loans with competitive interest rates and low fees, for both owner occupiers and investors.

Use our home loan repayments calculator to work out how much one of these home loans with competitive rates would cost you each month, and speak to a friendly lending specialist for more information on how we can help you. Get in touch by calling 13 10 90 or apply online today! 

Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek professional advice tailored to your circumstances before making any financial decisions.

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