At first, it may appear that house ownership is a dream come true to the majority of Australians. Nonetheless, is that really so? In fact, research informs us that the main things that people expect from their money are options and freedom.
These two aspects are big factors influencing home ownership. Truth be told, this assumption has a lot to do with our culture. We tend to relate home ownership to adulthood and safety. But there is a question that follows: is it a good idea to buy a house or should you choose renting?
Is It A Good Idea to Buy A House?
It’s no secret that purchasing a home implies a variety of upfront costs. Some are paid immediately after the seller accepts the purchase offer, and others are left to be paid at the closing. Nonetheless, in contrast, many convey rent money as being dead money. This opinion is accurate to some extent, and the logic is straightforward.
Being a tenant doesn’t mean that you’re investing in something worthwhile. In comparison, we could say that the non-deductible interest is a sum of money that you’ll never see again. That is why, for some people, renting can be much more affordable and convenient, in contrast with a mortgage.
Plus, a house is a massive investment that is imminently affected by inflation. That is a significant disadvantage that cannot be undermined; and all homeowners must face this eventually. So, whenever you’re wondering if it is a good idea to buy a house, make sure you consider that.
The Costs of Buying a House
We said that many people assume that rent money equals dead money. How about the interest rate attached to the mortgage? At the moment, the relative interest rate on the Australian market is evaluated at 4.5 percent. In other words, a loan of $400,000 would imply no less than $18,000 per year. In the same respect, the interest rates of variable mortgages are increasing, and financial experts anticipate that they will reach 6.20 percent.
Is it a good idea to buy a house especially if we were to consider the significant costs linked to this decision? The amount of expenses that accompany home ownership shouldn’t be neglected either. Fees, insurance costs, repairs, depreciation, council rates are only some of the many expenses you have to cope with.
Taking Advantage of Negative Gearing
Currently, the tax law enables you to require the shortfall between interest, costs, and income earned on a rental property. In essence, that means that the tax savings received diminish the costs of ownership. Still, as a house owner, you should find out that these expenses aren’t deductible.
Relishing the Freedom to Move
As we initially mentioned at the beginning of the article, many people appreciate freedom. That is what renting grants you: the freedom to move whenever you want. Committing to a large mortgage can compromise your freedom. As an alternative, you can choose to invest in rental property and build passive income.
In conclusion, the question “is it a good idea to buy a house?” is something that you have to answer yourself. What one may convey as the perfect scenario may be the other way around for another person because we are all different. Make sure you assess and re-assess all the pros and cons before making a decision.