When you’re younger and perhaps less financially stable, the idea of renting is one of the most popular solutions for solving the problem of where to live after having moved out of the family home.
There are many advantages to being a renter. You can look around for the type of flat and area that most suits your needs, and you can share the cost with flatmates or enjoy the advantages of having the place all to yourself for the duration of your lease.
However, as you start to build up more financial resources it can often be tempting to make the move to being a fully-fledged homeowner. If you’re considering whether it’s time to make the leap yourself, here are a few things to keep in mind.
Renting vs buying a home
There are positives and negatives for both sides. That’s why it’s a matter of weighing up your future goals, needs and current financial situation to determine if renting or buying is the better solution for you.
Renting is the popular next step for many people after they leave home and start their adult lives. It can also be more convenient, giving you the flexibility if you’re changing jobs or moving around more frequently, it’s also cheaper in the short term than buying a house.
According to the Australian Bureau of Statistics (ABS), during the 2009–10 period around 24 per cent of Australians were renting their home from a private landlord and 4 per cent were renting from an official housing authority.1
Of course, renting is a great option when you don’t yet have the funds together to purchase your own home outright, or if you anticipate having to move around to different places in the future. On the other hand, renting can be unsuitable for people who wish to settle down more permanently and have the financial means to do so.
In addition to this, it can be difficult having to find a new place suitable to rent every time your lease finishes. That’s not to say buying a home doesn’t come with its own set of hurdles, but over the long term it can offer certainty.
What’s more, being able to build up equity in your property may also be an advantage. Homeowners also have greater freedom to customise and modify their property as they wish, which can also be a big drawcard.
Many Australians aspire to have a property they can call their own. ABS figures reveal the homeownership rates in Australia have stayed relatively stable at around 70 per cent over the past few years2, and during 2009–10 an estimated 33 per cent of households were mortgage-free1.
Being a responsible home owner
While there are many advantages to owning a home, it’s also important to remember the initial costs can be significant. That’s why it’s important to make sure you’re ready for the change should you seek to own your own property.
Saving up for a home deposit, arranging a suitable mortgage and dealing with all the indirect costs such as moving expenses and utility connection fees should be carefully accounted for in your budget.
In addition to these costs, it also helps to consider how you will protect your new investment. Your house will become a cherished place full of memories, laughter and joy as well as the home of your physical possessions and valuables.
Once you’ve made the commitment to buy, it’s also important to consider taking out life insurance policy. If you or your partner died or became seriously ill and couldn’t work, it’s important to consider the financial impact that mortgage repayments would have upon your family.
Buying a home is a big commitment, so you don’t want to leave any of your important assets vulnerable. Making sure you have the right insurance policies for your needs is one of the first steps to looking after your new property.
- Home Owners and Renters, Australian Bureau of Statistics
- Levels of Home Ownership, Australian Bureau of Statistics
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.