To buy or to rent? That is the dilemma facing many potential homeowners today. It seems that buying a home is more costly – and time consuming – than renting a home. However, if you can comfortably afford to do so, and you have plans to stay at your new home for a while, buying a home has significant advantages. Financially, owning a home is often promoted as a better choice than renting. Currently, in some states of Australia, there are significant financial incentives for ‘first home’ buyers.
In addition, long-term homeowners build equity by paying down their mortgage and then their home appreciates in value. Many savvy homebuyers increase their equity more quickly by buying homes that need cosmetic improvements such as decorating, a bit of painting, replacing carpets and so on, rather than structural renovation like building decks, moving walls, adding ensuites and extra bedrooms. Minor improvements can significantly increase the value of a home over a relatively short period of time with a modest investment.
However, there are times when renting a home is the more sound choice to make. For example, if you are only going to be at your place for up to a year, it makes no sense to buy the home. If you buy and then sell in a short period of time, you may actually lose equity if you have not bought well. You need also to reconsider the buying and selling, agent commission, legal and stamp and so on.
But renting makes good sense if you have identified the general area in which you want to live but you haven’t made a final decision as to specific neighborhood, the size and the style of the house you need. For instance, many families who move interstate will rent for a period while they are deciding where they want to live. If you don’t know whether you’ll be comfortable in a particular neighborhood, it may be better to rent a house or an apartment there for 6 months or even year, to get more comfortable with it and help you make that decision. It gives you a good chance to look around and really get to know the neighbourhood.
Here is a tip if you want to buy straight away. Make sure you really get to know what’s going on in the neighbourhood would you propose to buy your home by visiting a different times of the day and even different days of the week. Get out of the car and walk around. There is nothing worse than buying a house or a home for your family and finding out after you move in something you should have known before you purchased it.