Rent or Buy a Home?
Which is the smarter option between renting and buying a home? A quick answer is – it depends on your personal profile and preference.
When it comes to renting a home or buying a home, two important factors that are often looked at are, costs and responsibilities involved for either the homeowner or the tenant. Here, we look at the pros and cons of either option to help you make an informed decision.
Costs
If you decide to rent a property, you’ll be faced with low start-up costs compare to huge upfront expenses required in buying a property. At the initial stage, a tenant is expected to a pay a deposit and a first month’s rent. But when buying a property, a homeowner will have to cover some initial costs such as property registration fees, home loan deposit, estate agent fees and bank fees.
In terms of annual costs, a tenant will have to pay rent on a monthly basis as stipulated in the lease agreement. After some time, the tenant will be required to renew the lease contract, which will likely be subject to an increase in rent.
In comparison, buying a property means the homeowner will have to pay monthly bond repayments. The annual bond repayments accumulate equity over time, and are tax-deductible, resulting in saving in the long run.
Responsibilities
Being a homeowner means you are directly responsible for paying levy and utility costs of the home, including water, land rates and electricity. A homeowner also incurs costs that involve general home repair and maintenance. While water and land rates are usually included in the tenant’s monthly rental amount, tenants are still expected to part with monthly electricity fee as an additional payment.
In conclusion, renting a home or purchasing a home should be a short-term solution while buying a long-term option. When torn between renting a home or purchasing a home, look at the financial factors involved over a long-term period.