An article in The Age took a look at the question of whether it is cheaper to rent or buy a property. While it may seem cheaper to rent in the short term, say two-three years, if you take a longer view then the answer becomes clear; buying is the way to go.

According to the author there are four key reasons or costs for why buying is better than renting, they are:

1. Frequent moving costs

Tenants move house more often than a home owner.  If you move every couple of years, with each moving costing around $5,000 you can add an additional $50 onto your weekly rental costs.

2. Rising rental expenses

The beauty of being a home owner is having the advantage of fairly stable mortgage repayments, if you have a fixed rate mortgage or a similar set up. Owners don’t have to worry about the landlord increasing their rent every year.

3. Owning a growing asset

You’ll never own your rental property. However, home owners gain an asset that increases in value over time, where a tenant is left with nothing to show for their spent money.

4. Long term – think of your retirement

The last thing you want to be doing in retirement is paying rent. You’d still have a regular expense that you can’t escape, and now have little income to pay for it. This is where ownership can give you security and freedom.

If you are looking to buy a property, and say goodbye to renting, check out the 2 and 3 bedroom townhouses we have available at Paperbark Place in Mooroolbark. You can find out more at www.fastlovehomes.com.au/paperbarkplace

You can read the full article here: http://news.domain.com.au/domain/real-estate-news/what-is-renting-really-costing-you-20150330-1m8gr1.html

Some people who live in large family homes may find that the kids have flown the nest and they no longer need such a big place, so they can use the equity in their home to buy a smaller, cheaper place (right sizing we like to call it) and the use the difference to fund or supplement their lifestyle.

Do you know what equity is and how you get it?

Equity is basically the difference between what your home is worth (market value not what you think it is worth) and what loan amount may still need paying off. For example, if your home is worth $500,000 and your home loan is at $300,000 then you have $200,000 in ‘equity’.

The beauty of equity is that banks and other lenders will let you access that amount to fund other purchases (not usually the whole amount mind you but a good chunk like 80 percent). So you could use the equity to buy a new car, take a holiday or put down a deposit or buy an investment property.

Don’t forget that once you start using your equity you will increase your loan amount and have to make increased repayments.

If you are buying an investment property and then using the rent payments to help you pay off the larger loan then you may be on to a winner as you pay off a loan with help, while potentially having the property increasing in value, and thus also creating additional equity.

You need to be sure that you are calculating all the costs involved with buying an investment property and not just doing some simple numbers that look great. Get some help from your accountant or financial adviser if you are unsure.

Using your equity can be a smart way to buy an investment property or fund a nice little lifestyle.

Have you ever used equity to buy another property or fund your lifestyle?