| Making the Transition from Rent to Mortgage
Home ownership is often referred to as the “Great Australian Dream”. This is a major goal for may renters. It is achievable – but not without hard work and discipline.
To be clear, purchasing a house costs far more than your deposit and your monthly mortgage payments.
Some of the extra costs include:
- Mortgage application fees – approx. $500
- Lenders Mortgage Insurance – depends on many factors
- Home Insurance – $1200 – $2000 /yr
- Pest and Building Inspections – $300 – $800
- Conveyancing fees – $600 to $2,000
- Stamp duty – varies state to state (often free for first home buyers)
- Moving Home – varies wildly depending on the move
- Council and water rates – depends on where you live and the value of your home
- Home maintenance – depends totally on the house you have bought
- And this is all before you want to do any improvements or renovations
So as you can see, there are a lot of added costs in comparison to renting.
The upside is you are being forced to save all the while paying off an asset that most times will increase in value.
But you need to be structured, disciplined and prepared. Often, especially in the early years in can be tough on cashflow. This is why it is not a simple process to get a mortgage. Especially your first one.
It is important that you have a financial buffer that you can fall back on for unexpected costs. This will also help ensure you never miss a mortgage payment.
If you can pay your mortgage off a little faster you can save many thousands in interest costs. We have a separate article on how to do this.
It is great idea if you learn to be at least a little handy with tools and basic repairs and painting etc. This may save you many thousands in paying tradies. Remember when things go wrong you cant just call the landlord to get it fixed.
One the biggest benefits of purchasing over renting is “stability”. As long as you can stay on top of your payments, you can stay in the same home as long as you want. It is your house, no inspections, no landlord rules, no leases. Just a number of extra expenses.
But in the end it is worth it for all the benefits.