Rent versus Buy

With low interest rates and renewed confidence, now is the time to review the rent v buy argument. There are four factors you need to consider;

Cash Flow – What will it cost you in each scenario? This part is easy to figure out. The cost of your home is your mortgage payments plus your property expenses (insurance, strata, rates etc). To keep it apples and apples, you should only count the interest payments on your mortgage.

Growth – What will you potentially make in the future? This part is harder to figure out. If you rent, the only growth prospective you have is investing your cash flow savings (if there are any) of renting instead of buying. If you are buying a home, you will have the growth potential of the property you have just purchased. This may or may not be relevant depending on what stage in life you are at.

Risk – What level of risk are you prepared to take? Renting could be seen as the safer option because you have no mortgage, however other people see a home as safer because there is a roof over their heads and they have no landlord.

Emotion – What do you really want? Do you want the security of your own home and are you are willing to make some financial sacrifices to do so. Do you just want the best financial outcome?

If you evaluate these four areas, by the end you will have a good idea on whether to buy or rent.

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