Renting versus Buying
I’m in the business of selling houses to delighted buyers.
But I appreciate that for you, the prospect of homeownership might not be so much a dream but more an exercise in uncertainty. This doubt is often expressed in this age-old question:
Would I be better off renting?
To rent or to buy is the dilemma that will endure for as long as we live in houses. Because of what I do, you might expect me to say that buying will always be preferable to renting but I know that it’s not that cut and dried.
Renting a home does have its advantages. For a start, the landlord is responsible for attending to any maintenance, and that includes paying for it. Meanwhile, the upfront costs for you, as a tenant, to move into a property are obviously lower than the deposit you’d have to pay were you buying a home.
A study revealed that as of March 2019, it took 27.5% of the average household's after-tax income to pay the median rent in New Zealand, compared to 26.8% to pay the monthly mortgage payments. But that doesn’t take into account that you don't have to pay a large deposit as a tenant, which makes renting a money-saving exercise in the short term. And then, there is the flexibility of being able to move to a more desirable home or location should you want to – although in today’s property market, where rentals are in short supply, that ability to move with relative ease is diminishing by the month.
Renting has its downsides too. As a tenant, you live at the whim of your landlord. Should the landlord decide to sell, that could mean you have to find somewhere else to live should the new owners want to move in. That uncertainty hangs like a cloud over any tenant. Even if the landlord owns the property as an investment, a downturn in their financial fortunes could force them to sell up to liquidate some much-needed cash. As such, you can never feel 100% secure in your rented home.
Buying a house obviously removes this threat. Your home is your home. You choose what you do with it, and how long you live in it. No one can sell what roof over your head from under you. You’re in charge of that! As an investment, a house is one of the biggest and best you can make. Putting money into a house will give you better returns over time than the miniscule interest rates now being offered with term deposits. All the time, you’re putting money into your asset and collecting tax-free capital gains over time. Of course, there’s also the option of becoming a landlord yourself and enjoying a passive income as a result. Plus, you can renovate as you see fit, and the self-esteem of owning your own place should never be under-estimated.
Most economists suggest that if you do decide to buy, then you should do so with as high a deposit as you can muster. This means lower repayments which compare favourably to paying rent. On the other hand, a small deposit will mean higher interest on a mortgage, which makes the whole repayment exercise a less affordable one. When this happens, renting looks pretty good in comparison.
There is no better investment than owning a house.
Getting a foot on the property ladder in this day and age is a huge step and will go a long way to securing your future. If you can afford to buy, the benefits are significant.
For all that, you might still be undecided.
I suggest that if you are, you get in touch with me and I’ll steer you in the right direction.
This will include advice on surrounding yourself with the right people, be it, someone, in your bank that you can work with or a mortgage broker; anyone you can take advice from as to how your current situation aligns with your future homeownership prospects. Contact me and we can begin to resolve that rent or buy dilemma!
