Horror $47,000 cost blows up the owning vs. renting debate: 'More expensive'
You might have heard the phrase that renting is "dead money" or that you're just "paying off someone's mortgage". When you're forking out hundreds of dollars a week to keep a roof over your head, that idea can seem fairly depressing.
But Consortium Private Wealth financial advisor Robert Goudie wants Aussies to change their mindset when approaching rental payments. He told Yahoo Finance that while property ownership should still be a major goal for Aussies, it's not always the most ideal situation and you shouldn't rush into it without understanding what you're paying.
"From what I've seen, sometimes it's more expensive to own the property because no one thinks about the cost of ownership, which is your rates, and your insurance, and your water and service charges. and any maintenance that might be applicable," he said.
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He wanted to set the record straight and did the calculations for how much you can save when you rent.
Goudie gave an example of Person A who was spending $500 per week on a house worth $750,000 and Person B who bought a $750,000 house and lived in it.
Person A would have spent $26,000 in a year on rent.
However, the other person, who stumped up an impressive $100,000 deposit and had a 6.5 per cent interest rate on their loan, would have paid $42,250 just on the interest for the mortgage.
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When you add on rates and insurance costs, the annual bill rises to $47,250, or just short of $910 per week.
That means Person A will be able to save $410 more per week than Person B.
"People say rent is always dead money. Is interest not dead money? Paying money to a big corporation making billions... I think it is," Goudie explained to Yahoo Finance.
"If rent is dead money, then interest should be considered dead money as well."
Buying might not be the best idea right now
The financial advisor wants this general advice to be a warning for Aussies to do the calculations themselves to work out if buying a property is going to be the best financial move for them.
"I don't blame young people for wanting to get on the property ladder... there is that feeling of, 'If I don't get in now, [property prices] just keep going up'," Goudie explained to Yahoo Finance.
