Am I better off renting or buying?

Last updated on June 9th, 2023
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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The pros of renting

If you are renting, you know that it gives you much more flexibility. If you aren’t happy with where you’re living, you can negotiate your way out of a lease and move elsewhere. You can also rent into an area that you normally couldn’t afford to buy in. Renting also means you won’t have to pay home and contents insurance (although you can buy low-fee renters’ insurance), council rates or any other taxation that applies to home ownership. Another pro of renting is that you can use your surplus cash to invest in shares or managed funds, which can give a higher rate of return than property in some cases.

The cons of renting

The obvious downside to renting is the timeworn adage – rent money is dead money. Your rent money is making someone else richer and building his or her equity in your rented property. That means at the end of your lease, you have nothing to show for it. Your rent is subject to the official Reserve Bank interest rate – if the rates go up, so does your rent. Also, you can’t treat your rental property as your home – you have to ask permission to modify the house and deal with real estate agents if things go wrong.

The pros of buying

To echo the old bank advertisement – “Equity, mate!” Owning your own home means you are gaining equity (or gradual ownership) of a real asset that tends to appreciate. Buying also has non-financial benefits, too. You won’t have to get permission to renovate, extend or upgrade, nor will you be subject to invasive real estate agent inspections every so often. The big plus? You feel more at home. You own everything. Since there’s no bond to speak of – if you break something, it’s already yours! So you won’t upset anyone if you do (maybe your spouse…)

The cons of buying

If rent money is dead money, then non-deductible interest on your home loan is also dead money. If you choose to move in a short period, you may not make any significant gains in value – you may have sunk more money into the house than you are getting back. The RBA in a 2014 report said that owning might only just beat renting over a span of 30 years. If the housing market crashes, this could wipe out the value of your home virtually overnight. Plus, you’ll have to pay your own council rates; stamp duty and insurance to make sure you’re covered. This is on top of the huge deposit you must save in order to avoid paying Private Mortgage Insurance.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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