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For those still deciding whether to rent or buy, it can be a tough decision.
There are certainly benefits to both and weighing up the choices can be hard. However, keeping the long term benefits in mind, the advantages of purchasing a home stack up pretty well.
Firstly, if you buy a house, it’s yours. Moving out when you please is one advantage, in addition to the freedom to paint, decorate and renovate without the landlord’s permission. There are no leases to worry about and no last minute paint jobs to cover up the yellow walls in the kids’ room that they so desperately wanted.
Secondly, selling a primary place of residence comes with the added sweetener of not having to pay Capital Gains Tax (CGT). The sale of other assets such as shares or investment properties will incur CGT, assuming you made a profit. However, when you sell your home, any profit you make is tax-free.
“Profit you make on your primary place of residence is tax-free.”
Another bonus of owning your home is that over the years, rental payments will likely increase in accordance with the market. If you buy your property and take out a mortgage, your mortgage repayments will likely remain about the same, assuming interest rates don’t vary much. This offers peace of mind in addition to simplifying your budgeting and setting future savings goals.
Don’t forget that whilst similar amounts of money may be flying out of your wallet each month whether you are paying off a mortgage or renting, the rental payments are going towards someone else’s mortgage repayments whilst your mortgage repayments are paying off your own home. This is an important consideration for a number of reasons:
- The more of the mortgage that is paid off, the more equity the owner has.
- Equity means security.
- Security means the ability to borrow more money for investment properties, renovations/extensions to the existing property or access the equity for your retirement.
- Renters don’t have this luxury.
“The hardest part about buying a house may be saving for the deposit.”
Another benefit of owning your home is that you aren’t at the beck and call of the landlord or property manager trying to organise routine inspections. This can be very annoying as a renter, especially if you aren’t the tidiest of tenants.
The benefits of owning a home are great. However, the hardest part about buying a house for most people is saving for the deposit. If you can get past that hurdle, you should look to buy.
– Peter “The Property Professor” Koulizos