Many renters considering switching from a lease agreement to a mortgage can find it difficult to fully assess which path is more beneficial, but the best solution can only be decided on a case-by-case basis, according to aggregator Loan Market.
Loan Market corporate spokesperson Paul Smith said that while some public data could be used to justify both sides of the argument, borrowers need to consider their own personal circumstances and financial goals to determine if they’d be better off owning or renting.
“If you’re looking at purchasing a property, you should research similar properties in the area and see what type of rental payments are being asked for. You should then work out exactly what your mortgage repayments would be after establishing your home loan.”
Smith also argued that it’s crucial for first home buyers to consider their options on a case-by-case basis and said that, when comparing rental and mortgage repayments, it’s important to evaluate the property from both a renter and home owner perspective, taking into account the different calculations and costs that need to be factored in for each.
Michelle Hutchison, spokesperson for financial comparison website RateCity, agreed.
“The biggest danger with buying a home for the first time is that you’ve never experienced re-adjusting your budget and fall short when rates rise. Interest rates are currently at record lows. It’s easy to get used to paying low interest but rates are likely to rise eventually and borrowers should prepare now by adding to your repayments.”
Smith said renters who are considering purchasing their first home should create an educated estimation of rental repayments of the properties they’re interested in, calculate inflation of both rent and property value based on current inflation rates – not targeted ranges – and remember that the interest rate on property won’t stay at its initial rate through the course of the loan.
“There are advantages to being both a renter and a home owner and those benefits should align to your own financial goals. With so many factors influencing buyers’ repayments, it takes some investigation to determine if you’re better off renting or buying.”
