Update: renting vs buying

Property Investors Federation Vice-President, Andrew King, says it now costs twice as much each month to own a home as it does to rent one. His example is a 90% mortgage on a median-priced $345,000 house, but it could be applied to any situation where the mortgage is roughly $300,000 or more.

In our own situation, to move from renting to owning would cost us over $5000 a month in terms of lost interest on capital in addition to new money we would need to fork out on interest to some bank on a brand new mortgage. That might be fine if we were 30, but we're not 30 any more and haven't been for a while.

Never mind the ages. I doubt it is ever really all right to pour money down the drain in volume to own a house today. If I had my time again, I'd have focused more on saving a bigger deposit and then getting rid of any mortgage much faster. Once you're debt-free, you can have the same lifestyle - or better - on half the income.

Feeding the bank for decades is like having a bucket of leeches sucking your blood away day after day while you toil away getting older and greyer, wondering what it's all for. Sure, our name is on the title deed, but you're only one income-reducing event away from a mortgagee sale for much of that time.

Looking back, it was obvious now that it was all for feeding the bank. The biggst increase in our own equity wasn't from paying down debt, it was from trading up and realising the capital gain on the previous house. But the mortgages never got smaller. They got bigger as we traded up to bigger and better houses in nicer neighbourhoods. The treadmill was spinning flat out.

Had we not bought a house at all, we would have been able to save far more or at least have a lot more fun with what we didn't save.

I recently calculated that owning a home would cost us over $200,000 over the next 5 years versus renting. That did not include maintenance and insurances. I was wrestling with the (apparently) emotional need to own my own home. Looking at the cost, I concluded I'd be much better off NOT owning a home and instead spending $30,000 on counseling to deal with any resulting anxieties.....

Having said that, we may well buy a home at some stage, but it will be a modest one with a small mortgage we can pay off in under 5 years. Anything else is just crazy. No wonder people pay far too much to buy houses. It's one more example of emotions over common sense.....as though we need any more of those.

I'm waiting to see how low the property market goes. The next 6-12 months will make that clear.