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Home Loan Experts mortgage broker Rojan Paudel and senior mortgage broker Jonathan Preston outlined key factors for individuals to consider when deciding whether to rent or buy a home.
Paudel emphasised that potential home buyers should have evaluated several questions to determine if it was the right time for them to buy:
- Can I afford it?
- Do I have enough for a deposit and ongoing mortgage costs, or is renting more manageable?
- Is my income stable?
- Can I handle mortgage payments long-term, even if interest rates rise?
- How long will I stay?
- If I plan to stay five years or more, buying may be more sensible.
- Am I ready for ongoing costs and repairs?
- Can I manage the costs and maintenance of owning a home? There are many hidden costs associated with property maintenance, so having additional funds is beneficial.
Paudel also highlighted emotional readiness, stating that owning a home involved long-term responsibilities and commitments.
External factors for home buyers to consider included market timing and resale value.
Property prices and interest rates could fluctuate, making it important to assess whether buying in a hot market might lead to overpaying or if waiting too long could mean missing opportunities if prices rose.
When rental costs also increased, buying sooner might have helped in entering the market.
Not all homes appreciated in value, as location, market trends, and economic conditions could influence resale value.
Paudel explained that renting and buying affected buyers’ finances and lifestyles differently.
Renting usually involved lower upfront costs and potentially cheaper monthly payments, but it did not build equity.
In contrast, buying required a larger initial investment due to the deposit and stamp duty, along with ongoing costs, but home ownership could lead to equity growth over time.
“Buying offered long-term stability, pride of ownership, and the ability to personalise your space, but it limited mobility. Renting provided flexibility to adapt to changing circumstances, such as a new job, but offered less security and control, as rent could increase or leases might not be renewed,” he said.
Preston added that overall affordability was another crucial factor to consider.
He questioned whether potential buyers could afford to continue renting, as delaying the decision to buy could have led to being outpriced.
“One key consideration I thought people didn’t talk about enough in Australia was whether they would continue to have access to property.
“…for example, in NYC, they have the ‘40 times rent’ rule, they want you to earn a US$80,000 salary if your rent is US$2,000 a month.
“But in New York, rent for the average two-bedroom place is US$5,200, so you need to earn US$208,000 (US$5,200 x 40 = $208,000) just to qualify to rent the average place. It’s getting to a point where people can’t qualify to rent, let alone buy.
“In the future, it might have been like that here, too. Being able to buy while you still could seem like something to consider,” Preston said.
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