The decision between renting and buying can be a troublesome one, particularly for young people leaving their childhood home. In the end, it’s always nerve-wracking to make a significant life choice, especially when it’s about to change your entire lifestyle as a whole.
Some people will choose to buy a home if they are in a stable enough financial position with a reliable job, and are ready to settle in one particular location. However, when you’re about to enter a mortgage it’s important to consider the longevity of the commitment you’re heading into.
In other cases, you may choose to rent if financial or personal reasons mean buying isn’t sustainable (or realistic). Perhaps entering a long-term agreement isn’t on the cards, either. Rental contracts typically only last 12months, so if the properties need to be abandoned or mended, there will be less of a financial loss than there would be in a home loan agreement.
Okay, we know there’s a lot to think about. But instead of feeling overwhelmed, we’ve put together some of the most important questions to keep top of mind, when you’re assessing your options.
Do you have financial limitations?
In order to buy a home, you will not only need to produce a hefty initial deposit, but will also need to commit to sizeable weekly repayments. These repayments may be ongoing for up to 20 or 30 years. If you cannot provide evidence of a stable income, banks are unlikely to allow you to borrow money. For some, this will eliminate the possibility of owning their own house.
Rental payments, although they have a similar frequency, are often smaller in size. This makes renting more suitable and sustainable for some in the short term. Arguably, renting can be a poorer financial decision when you’re looking at the long run, primarily because you are essentially losing your rental payments to an asset that you will never own. In comparison, mortgage repayments go towards an asset you will eventually own.
How long are you willing to be in the one location?
Purchasing a property is a big commitment, and, unless you plan to utilise the home as an investment, you are likely to be living in it for the duration of your mortgage. If you are deliberating on beginning a family in the next decade or two, you should reflect on whether the property is in a good location for schools and daycares.
Renting provides you with the flexibility to move house after (usually) a one year period. If there is a chance that you may need to relocate due to career or family needs, this option could work to your advantage.
Are you confident enough in the property?
When purchasing a property, you must be completely certain that you are satisfied with all aspects of the building and land. If you are experiencing doubt it, could be a sign that committing to the purchase may not be in your best interests. In the end, it’s worth being patient until the ideal home comes on the market.
On the other hand, renting gives people the opportunity to ‘suss out’ a home and ultimately leave at the end of their rental term if they’re not fond of their experience of the property itself. In some cases, the location just may not be a suit at all.
It is important that you make an informed decision for your living arrangements, no matter how excited you feel about being within your own space. Mortgage contracts can be difficult to break once they have begun, as can rental agreements – even though they are shorter-term.
Beyond all of this, if you are in a relationship, it is important to consider not only your own, but also your partner’s present and future goals.