Purchasing a home of your own has many benefits, with the most obvious being the sense of belonging and the ability to personalise your living space. Indeed, as the ABS points out, around 69% of Australians own their own home, either outright or with the help of a mortgage.
Yet the reason so many of us aspire to home ownership is not only due to emotional reasons, but financial considerations as well. So if you’re currently sitting on the fence about whether to buy or rent, check out these points and see how they factor into your financial goals.
Many people overlook the costs associated with renting, and one of the most often ignored is moving costs. As the Australian Housing and Urban Research Institute (AHURI) pointed out recently, “in the 5 years to 2007-08, 39% of private renter households had moved three or more times”.
Tenants can be asked to vacate the property for various reasons, such as the property being sold, the owners wanting to move back in themselves or if the property is in need of major repair works.
The costs of finding a new home and moving into it can quickly add up, especially if you have to move repeatedly. Owning your own home eliminates this instability, allowing you to set down permanent roots.
Virtually everyone knows the old saying of “rent money is dead money”. And this is true in a lot of cases, especially when you consider your hard-earned cash is paying off someone else’s asset instead of your own.
Even with a 30-year mortgage, your asset will generally produce a tidy profit, even after factoring in the initial purchase price, mortgage interest and ongoing maintenance and renovation expenses.
When you own a property, you can change and update it as you like. As well as creating a more comfortable home for your family, you can add significant value to your home through renovations and improvements, which can be used as equity to redraw or as profit when it comes time to sell.
However, always be sure you dont overcapitalise on any work you do, as this can wipe out any profits you would otherwise be able to cash in on.
Did you know that the sale of your home is essentially tax-free? It’s one of the few ways you can legally earn money without being taxed on the profits. That is because your primary residence is exempt from capital gains tax– except for periods where you may not have been living there.
For the typical family home, this tax-free status can add money to your bank account rather than the taxman’s if and when you eventually sell the property!
With the benefits of home ownership laid bare, it’s clear why so many Australians look to buy a property to call home. As with any major purchase, always ensure you are financially ready to buy and that buying a property is the right option for your family’s circumstances.