Rent or buy? The great housing dilemma!

RENTING

Pros:

• You don't have the debt burden of owing a big mortgage to the bank.
• Rent is usually cheaper than repaying a mortgage.
• You have more disposable income because of the point above.
• You are liable only for the rent and cost of utilities such as phone, electricity.
• The landlord pays the rates, body corporate and any repairs needed on the home or apartment.

Cons:

• Rent money is 'dead money'. You are effectively contributing towards the landlord's mortgage and paying off his asset.
• Lease insecurity is very real in today's rental shortage market. Apart from having to fork out extra when the landlord puts up the rent, you may have to vacate for any number of reasons, e.g. the building is sold.
• Adding your own touches to your rented-home-sweet-home is confined to moveable décor. It makes no financial sense to paint a bedroom, re-tile the bathroom or make over the entire garden.
• In theory you should have more disposable income but in practice, it's likely your savings won't reflect this.

BUYING

Pros:

• Your monthly mortgage is paying off your own asset. Your regular payments work as a type of compulsory savings plan so, over time, you are building ‘equity’ which is an ownership interest in your house.
• You can borrow against this equity, after a few years or, alternatively, convert it to cash by selling the house.
• You can keep mortgage repayments steady with the right home loan and avoid erratic rent increases.
• You have a more secure roof over your head. Family stability will benefit from knowing you will only have to move when you are ready.
• You can paint, renovate, landscape at any time without having to ask permission.
• Houses generally increase in value over time. Sometimes that happens quickly, other times the value plateaus out, however, as a long term investment, property can provide an excellent return.
• Once your mortgage is paid off in full, there are no further repayments.

Cons:

• You now owe a big debt to the bank.
• Most of your disposable income will go towards repaying the mortgage.
• You are at the mercy of interest-rate movements. If they go up, you pay more.
• Financial constraints may force you to buy in a less desirable suburb.
• If the shower leaks, or the garage door sticks, guess what – you have to deal with and pay for repairs and renovations yourself.