The Herald Sun recently published an article headlined “Renting costs outstrip mortgages in outer suburbs” (10 January 2019). Of course this quickly caught our eyes, especially with all the doom and gloom expectations. The article went on to say that there are currently two suburbs where it made more financial sense to buy rather than rent with monthly savings into their hundreds in comparison with renting.
While this news may seem like a rare but attractive opportunity for first home buyers, they have not considered a number of factors which are under increasing scrutiny by financial institutions with the latest 2018 credit crunch. We are talking other factors like personal income, household living expenses and the actual genuine cash savings required for a deposit, all being factors assessed by lenders before giving out money. They have also made a broad assumption that the average person looking for a home in these suburbs, such as Diggers Rest readily have a 20% deposit or $88,400. Having a 20% deposit is a fantastic starting point if you have had the capacity to save to these amounts as it will avoid the additional costs of lenders mortgage insurance however for the typical first home buyer weighing up to rent or buy, this is not usually realistic for them.
For your benefit we have taken some of the guess work out for you with a simple scenario of ownership verse renting to compare with.
Clearly the cost of owning a property can in fact surpass rental costs depending on your situation. We’re not implying that property ownership is bad. We just love working things out to give you the big picture. Remember, these are rough calculations we wanted to show you for the sake of curiosity. Nothing is ever as black and white! Also keep in mind that we haven’t factored in how Lender’s apply their credit policies. For example they will assess your capacity to repay your loan should interest rate increase, typically this is based on a rate of 7-8%. This can make or break a loan approval.
Purchase property when it’s the time is right and makes financial sense for you. Don’t pay attention to the headlines. Get educated, have your financial numbers crunched, be frugal, save regularly and understand how owning property may potentially look for you.
Looking to buy a property? Guidance on owning property? Need finance?
Speak with our Specialist Finance Advisers in a private one-on-one discovery session. They will assess your personal circumstances, review scenarios and finance solutions that are appropriate for you. Call today on (03) 9317 5019 or email at firstname.lastname@example.org