Monday, April 27, 2015

Should I get a home loan or continue paying rent

Australia is one country that has witnessed a sharp increase in the demand for property. There have been various debates on whether to continue renting or buy your house.  The house prices have been estimated to increase at a rate of about 2.4% per year not taking into consideration the inflation rate. By this estimate, one would benefit more from a mortgage over a period of about ten years as compared to renting for the same amount of time.
However taking into consideration the rate of inflation, the growth rate may decrease to about 1.7 percent thus one would take 30 years or more to break even.  Apart from inflation, there are other factors that influence the growth of property prices, and these include the Australiahome loan rates, repayment of home loan Australia loans and other ownership costs. All the above will influence one’s decision to decide to buy or rent and will also affect the bank’s mortgage rate. 

So what is the advantage of a home loan as opposed to renting?
The primary bone of contention in this debate is the cost effectiveness of either option. How much disposable income will one get at the end of the day? When one is renting a house, the money spent on rent only benefits the landlord but does not in any way make the tenant’s financial situation better. This is like money down the drain. When one buys a house, the monthly repayments that are equivalent to the rent, reduce the remaining balance on the house thus pushes the tenant closer to full ownership of the house.
The rate of inflation has affected a couple of cities such that buying property in this area may end up making you poorer. According to Cameron Kusher the RP data analyst, the location of the property plays a vital role in deciding between the two options. He gives an example of some suburbs in Melbourne and Sydney where the growth rate is placed at 2.9 percent in excess of the inflation over the last 15 -20 years. Therefore getting a property in these areas is bound to be more profitable.
Some analysts also argue that while many people would like to own property, they are unable to raise the deposit. The paradox of the situation is that these same people are living in areas closer to the urban areas thus increasing the living cost. Martin Beard, a former real estate agent, sold off his four properties and opted to rent. He attributes his decision to the amount of debt that one bears when trying to own property. He says that he enjoys the convenience of renting in a neat suburb that is also close to social amenities
At the end of the day, those who opt to buy rather than rent property have enjoyed certain benefits. They are like security of tenure, the freedom to make adjustments in the house and the pure comfort of coming to your home.
So the debate between the two options is still ongoing but one has to decide what will work for them in the long run. Take your time to consult a mortgage broker for guidance on the whole process of applying for a mortgage and the cost implications of a home loan Australia.

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