Buying
Lifestyle
The benefits of buying your own home
04-Sep-2018
Buying your first home can take a lot out of you. It takes a lot of time to find the right home and importantly the price that you can afford can really take a toll on your nerves. And of course, for most of us buying a home means borrowing a big amount of money on a 25 year mortgage.
Yes it can be a trying experience, but for most Australians, the positives of being a homeowner far outweigh the negatives. So what’s the appeal?
Feeling secure
Australia has the shortest residential leases in the OECD (Organisation for Economic Co-operation and Development), with renters typically signing up for a 12 or six month lease. Compare that to northern Europe, where renters sign up for leases that run up to 10 years.
For renters, the end of the lease can bring a lot of anxiety – particularly in areas like Sydney where there quite often is a shortage of affordable housing. That anxiety disappears when you are an owner – you can stay in your home as long as you like.
Decorative freedom
Would you like to paint the kitchen purple? How about converting the garage into a gym and billiard room?
As a renter, you need the landlord’s permission to do many of the things that could help make your place feel like home – even hanging a picture in a new spot! Not so when you buy your own home. It’s your castle – yours to change and update as you like.
Growth power
Most first home buyers find their repayments are higher than the rent they were paying, even when the property they buy is smaller.
On the face of it that may seem like a losing proposition, yet most economic studies have found Australians are 2.5 to 4 times better off financially as owners rather than renters.
How is that possible? Simply put, real estate tends to grow in value faster than inflation and over time, the growth on the total value of your property should outstrip your ability to save. For instance, a deposit of $50,000 in the bank would earn $2,500 p.a if interest rates are at 5%. But if you use that money as a deposit to buy a $500,000 home which grows in value by 5%, your gain is $25,000. With the 10 year growth average for capital city houses sitting at around 9%, that growth in value should also outstrip the taxes, fees and rates you pay as a homeowner.
The equity nest egg
The difference between what you owe on your mortgage and what your property is worth is known as equity – and it’s the key to making money in real estate.
Your equity grows faster when prices are moving up and interest rates are going down or when you make extra payments on your mortgage.
Equity is a very handy financial asset. You can use your equity in your home to help you to buy an investment, start a business or as finance for other purposes.
Not taxing at all!
When you sell assets for more money than you paid for them, the difference is known as a capital gain.
Capital gains are great – it means you’ve made more money that year, but there is one drawback; the amount you made will be subject to tax. Except if the gain we are talking about is from the sale of your home. Unlike most assets, in Australia proceeds from the sale of your principal place of residence is exempt from Capital Gains Tax (CGT) under most scenarios.
SOURCE – realestate.com.au
Yes it can be a trying experience, but for most Australians, the positives of being a homeowner far outweigh the negatives. So what’s the appeal?
Feeling secure
Australia has the shortest residential leases in the OECD (Organisation for Economic Co-operation and Development), with renters typically signing up for a 12 or six month lease. Compare that to northern Europe, where renters sign up for leases that run up to 10 years.
For renters, the end of the lease can bring a lot of anxiety – particularly in areas like Sydney where there quite often is a shortage of affordable housing. That anxiety disappears when you are an owner – you can stay in your home as long as you like.
Decorative freedom
Would you like to paint the kitchen purple? How about converting the garage into a gym and billiard room?
As a renter, you need the landlord’s permission to do many of the things that could help make your place feel like home – even hanging a picture in a new spot! Not so when you buy your own home. It’s your castle – yours to change and update as you like.
Growth power
Most first home buyers find their repayments are higher than the rent they were paying, even when the property they buy is smaller.
On the face of it that may seem like a losing proposition, yet most economic studies have found Australians are 2.5 to 4 times better off financially as owners rather than renters.
How is that possible? Simply put, real estate tends to grow in value faster than inflation and over time, the growth on the total value of your property should outstrip your ability to save. For instance, a deposit of $50,000 in the bank would earn $2,500 p.a if interest rates are at 5%. But if you use that money as a deposit to buy a $500,000 home which grows in value by 5%, your gain is $25,000. With the 10 year growth average for capital city houses sitting at around 9%, that growth in value should also outstrip the taxes, fees and rates you pay as a homeowner.
The equity nest egg
The difference between what you owe on your mortgage and what your property is worth is known as equity – and it’s the key to making money in real estate.
Your equity grows faster when prices are moving up and interest rates are going down or when you make extra payments on your mortgage.
Equity is a very handy financial asset. You can use your equity in your home to help you to buy an investment, start a business or as finance for other purposes.
Not taxing at all!
When you sell assets for more money than you paid for them, the difference is known as a capital gain.
Capital gains are great – it means you’ve made more money that year, but there is one drawback; the amount you made will be subject to tax. Except if the gain we are talking about is from the sale of your home. Unlike most assets, in Australia proceeds from the sale of your principal place of residence is exempt from Capital Gains Tax (CGT) under most scenarios.
SOURCE – realestate.com.au