About the Rent vs Buy
The Rent versus Buy Comparator allows the user to compare their estimated financial
position after 7 years of renting with their estimated financial position after
7 years of home loan repayments.
The comparator assumes that the individual who rents will invest the deposit they
have saved to purchase their home. Similarly the other property purchase and home
loan start up costs, such as stamp duty and loan establishment fees are also assumed
to be invested.
The comparator assumes that the renting party will make monthly deposits equivalent
to their disposable income (taken to be the difference between the calculated monthly
mortgage repayments and the given monthly rental). Annual property maintenance costs
and quarterly rates are assumed to be invested by the renter.
To work out how much you can borrow, and the costs involved, use the "How Much Can
I Borrow?" tool.
The Rent versus Buy Comparator allows the user to compare their estimated financial
position after 7 years of renting with their estimated financial position after
7 years of home loan repayments.
The comparator assumes that the individual who rents will invest the deposit they
have saved to purchase their home. Similarly the other property purchase and home
loan start up costs, such as stamp duty and loan establishment fees are also assumed
to be invested.
The comparator assumes that the renting party will make monthly deposits equivalent
to their disposable income (taken to be the difference between the calculated monthly
mortgage repayments and the given monthly rental). Annual property maintenance costs
and quarterly rates are assumed to be invested by the renter.
To work out how much you can borrow, and the costs involved, use the "How Much Can
I Borrow?" tool.
The comparator measures whether your net wealth will be greater or less if you buy
a home.
It is important to recognise that the comparator is an estimate only and should
not be considered financial advice. Please bear in mind that your decision to buy
a home is not only a financial one. There are many emotional reasons for wanting
to own the home that you live in, even when the numbers don't necessarily justify
the purchase. Please view this analysis as one piece of information to consider
as you make this important decision.
Assumptions
The comparator makes a number of assumptions which impact on the results. These
include:
The return on funds invested defaults to 5 percent. However, the user can adjust
this in the "Change assumptions" area. The return on the investors investment is
calculated monthly, hence it is compounding monthly.
The difference between the loan repayment and rent is added to the renters savings/investments
monthly.
The monthly rental payment is increased by the rate of growth input by the user
in the twelfth month of each year.
Council rates are paid quarterly, hence are assumed to be invested by the renter
quarterly.
The annual maintenance cost for the property owner is assumed to be invested by
the renter in the twelfth month of each year.
Monthly mortgage repayment is assumed to include both principal and interest.
The calculator does not take into account the tax implications of buying vs. renting
a property.
The appreciation rate on residential property is assumed to be 8% [average annual
increase in median housing prices according to CBA-HIA figures from 1984-1998]