Rent vs Buying Calculator

The choice between renting and buying a home is an entirely personal one. Both options offer benefits and drawbacks, with an individual’s budget and need for flexibility being common considerations.

A homeowner has a far greater degree of control over their living situation and might expect the value of their property to grow as the years go by, eventually providing them with capital gains. A renter, on the other hand, can essentially up-and-move whenever they wish, or whenever their circumstances demand they do.

And in many cases, the question of whether one should buy or rent isn’t a question at all. Buying a home typically requires a substantial deposit, a few thousand dollars worth of stamp duty, and other considerable closing costs. Renting, on the other hand, is often cheaper and normally only demands a bond is paid and rent is met. Though, a renter won’t realise any return on the money they spend on housing.

If you have the means to buy, but don’t know if doing so is financially viable, Savings.com.au’s Rent vs Buying Calculator could help you make an informed decision.

Rent vs Buy Calculator

Savings.com.au’s Renting vs Buying Calculator compares the costs incurred and potential returns realised from renting property versus purchasing property. 

It considers the majority of financial factors facing renters, such as the cost of rent and utility bills, their current savings and ongoing saving habits, and their savings account’s interest rate.

It also looks at the costs born from purchasing a home, including the property price, home loan repayments, and upfront costs like stamp duty and lenders mortgage insurance (LMI), as well as ongoing costs and savings. 

Topping it off, it considers an estimated annual capital gain, calculating what kind of property price growth an owner might expect to realise as the years go by.

By putting all of that data together, the Rent vs Buy Calculator can estimate whether an Aussie might be better off renting or buying the property they plan to live in. But there’s likely more to a person’s decision than financial outcomes.

Is it better to buy or rent a property?

Whether it's better to rent or purchase a house or apartment depends entirely on you, your current situation, and your future plans. 

When is it better to buy?

Buying your own slice of paradise has traditionally been believed to be the Australian dream. 

There are plenty of reasons that Aussies might choose to purchase property. The main one perhaps being capital gains. The value of property has historically trended in an upwards direction, outpacing inflation. That means property has previously proven to be a relatively safe investment – and it can simultaneously provide housing or rental income to owners.

Living in a home you own will also likely be a vastly different experience to living in a rental property. For starters, you’ll have a much larger degree of control over the place. Don’t like the wall colour? Paint it. Can’t stand the kitchen cabinets? Rip them out and put new ones in. Want to adopt a new pet? Unless you have to abide by a body corporate, you’re pretty much entirely free to do so. 

A person who owns the home they live in also doesn't need to worry about being kicked out if their landlord wants to sell or move into their home. They can bask in a far more certain housing situation (and potentially save themselves a mountain of stress in the process). 

When is it better to rent?

On the other hand, if you own your home you’ll also be responsible for maintaining and repairing any issues. 

Gone would be the days of calling your property manager or landlord about, say, a leak – no matter how small or large. Owners have to organise and pay for any repairs on their home, while tenants shouldn’t have to deal with any such bother. Renters also don’t have to pay for building insurance, council rates, and other ongoing costs associated with their home, unlike owners. 

There is also something to be said of the flexibility that renters can enjoy. A person who rents can move whenever they wish to (though, they might face break fees for doing so). A person who owns might not have the same ability to simply pick up and leave. 

There are also plenty of examples of areas in which it is actually cheaper to rent than it is to own – particularly when interest rates are high. If you’re watching your bottom dollar, renting might be a better option for you.

Lastly, by renting rather than buying, a renter might have extra money to funnel into other investments, like a business or the stock market.

Renting vs buying: The downsides

Where there are upsides, there must also be downsides. Here is a brief rundown of the drawbacks of both buying and renting.

Downsides of buying a home

There are numerous downsides to purchasing the property you plan to live in. The first being the upfront costs.

Buying a home requires a decent deposit – typically a few tens of thousands of dollars. A buyer will also need to pay stamp duty, conveyancing fees, and potentially LMI. 

And once they own their home, they might find it difficult to move if they need to. If a homeowner wants to move cities, for instance, they might be forced to put their property on the market, purchase another with a subject to sale clause, and pay all the fees associated with doing so. 

A property owner will also face ongoing costs, such as mortgage repayments, rates, and insurance bills. Such costs might even see them paying more to own their property than they would otherwise spend on rent. They will also face these costs if, for some reason, they find themselves without an income, which could potentially cause financial stress.

Further, if for any reason a buyer wants to liquidate their asset – that is, sell it for cash – they will likely face a wait to do so. Unlike certain other investments, shares for example, liquidising a property can take weeks and months.

Finally, as with any investment, there are risks associated with owning a property. There’s no guarantee the value of your property will increase over the years. In fact, it might even fall, leaving you in the red. 

Or, the Reserve Bank of Australia (RBA) might hike the cash rate, driving your lender to increase your interest rate, thereby dinting your household budget. 

Your property might even be severely damaged by fire, flood, or severe weather. While insurance is generally well worth its cost, the emotional turmoil and immediate costs caused by such an event could be devastating.

Drawbacks of renting

There are also many factors that renters can rightly complain about. 

First off, while it can be cheaper to rent than own, that’s not always the case. 

Renters also generally have less security and control over their home than a person who owns. They might find themselves evicted if their landlord wishes to sell or move into their home. They also can’t make major changes to a space to make it more comfortable or preferable to them, and (depending on their state) they generally have to get approval from their landlord before adopting a pet. 

They also have little control over their housing costs. While buyers can fix their home loan interest rate or refinance to a better deal, a renter will typically have to fork out more each week if their rent is hiked or if the market rate increases. 

And finally, the money a person pays in rent is often described as ‘dead money’ as it is not building equity or offering any chance of providing a capital return.