RENTING VS BUYING
Financial independence is often the main reason for buying rather than renting. Besides not having to pay rent, in many ways home buying is a practical form of superannuation. The problems of having to pay, in thirty or forty years time, a rent that is constantly increasing because of inflation, when you are only on a fixed retirement income can be a burden.
Whatever your long term retirement plans are, you will never receive any of your rent money back - it is money down the drain. It only make sense that if you were paying off your home you would have something tangible to show after years of hard work.
In the short term, a tenant is clearly better off in terms of disposable income. This quickly changes as inflation starts to erode the cost of the mortgage and increases the rental cost. A tenants investments (banksavings etc) are usually tax deductible, and are also eroded by inflation, and there is great temptation to spend readily accessible income. The increasing value of your own home is not taxable and quickly provides an increase in asset value over the orginal mortgage.
In many cases this will provide equity as you can borrow more money to invest in other areas. In reality, sacrifices do have to be made in life, but at the end of the day lifestyle and your individual happiness is most important. If you cannot afford to buy in the area you most desire to live in, rent in that area, enjoy your location and lifestyle but stick to a tight budget with the intention of buying a little further down the track.
Too many people put too much pressure on themselves and relationships by moving into areas that might be affordable, but isolate them from family and friends and a lifestyle they are accustomed to.
For more independent advice, please contact our team today on 02 9960 1066 or enquiries@pkproperty.com.au.