Why buy when you can rent?
A friend of mine gave me a call last night and we got talking, as usual, on to the topic of buying property. He has been thinking about getting into the property market for some time but was questioning his strategy in light of a news report the day before suggesting that renting might be better than buying.
According to Channel Ten’s 7PM Project the night before, some Australians are giving up their dream of home ownership and choosing to rent instead.
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The report claimed that renting can mean a much better quality of life, particularly for home buyers who borrow too much and find themselves in mortgage stress.
Furthermore, the report said, renting can free up cash in order to save, or in my friend’s case – as an avid shares enthusiast – invest in the share market.
“You can make heaps more money in the share market,” he was quick to remind me.
True. Perhaps… If you’re a full time, stock market expert – which most of us are not, or have the time to become.
The truth is, what these property pundits are saying – if you read between the lines – is that buying a home you can’t afford, or buying when you’re not ready to meet mortgage commitments, is not a wise move.
While mortgage repayments may exceed the cost of renting – and place pressure on your lifestyle now – it is a long term investment.
With hard work and diligence, in 20 years’ time you could be the owner of a sizeable asset. If you go down the rental route you’re going to struggle to build an asset of that size, even if you’re a crafty share market trader.
However all first home owners need to go in with eyes wide open. Owning a home has its responsibilities, including the mortgage that comes with it.
Importantly, don’t over-extend yourself. Start off with something manageable – a one bedroom unit for example – and grow from there. Your lifestyle, income and savings will determine the most appropriate option for you. If you need help in establishing your borrowing capacity speak to your mortgage broker or lender.
