For some, buying a home will always be the dream. However, changing economic conditions have created a new ideal, for those who do not want to buy, or cannot afford to buy. Generation Rent, as they are sometimes known, choose renting over buying, and are especially common in large cities where house prices are high.
But which option is better? Should you rent or should you buy? The answer to this will depend on your own circumstances. However, here are our top six reasons why buying is better than renting.
Improving your credit
Having a mortgage can help to improve your credit – as long as you treat it correctly and always pay your repayments in full and on time. When you apply for credit – such as another loan or a credit card – the credit provider will check your credit history to assess your credit worthiness. If you have a mortgage and consistently pay your repayments on time, lenders will generally look on your credit applications more favourably.
Borrowing against your home
Having your own home can allow you to borrow against it and use it as collateral. If you want to apply for a personal loan, you may use your house as security. If your mortgage is in good shape, the personal loan should be easier to get, and as it is secured against your house, the interest rate you pay may be lower. However, don’t risk your home with a loan you cannot afford – only take out credit against your home if you are sure you can pay it back.
Creating a nest egg
This is one of the main reasons to buy instead of rent. As you pay off your mortgage, you own more and more of your home (unless it’s an interest-only mortgage). Once your mortgage has been paid off, the house is yours. When you retire, you won’t have to worry about paying rent each month, and you have a substantial asset in your name.
Buying can be cheaper
In some areas and in some circumstances, buying can be cheaper than renting. Compare the differences in your area, and think about whether buying your own place would work out cheaper in the short term and the long term. Use a mortgage repayment calculator to work out a home loan repayment schedule that works for you.
Not being at the whim of a landlord
When you rent, you are at the whim of your landlord. The landlord could choose to evict you or raise your rent. You could have a landlord that is completely useless and leaves you without hot water for a week while waiting for your boiler to get fixed. While having a landlord can have advantages (no Strata, no council rates, no maintenance costs), it can also have its disadvantages.
Rent money is dead money
There is the argument that rent money is dead money. While you certainly get a service for the money you pay your landlord (most notably, you get a roof over your head), you are essentially paying someone else’s mortgage. This can be fine in the short-term, but what about the long-term?