And obviously, for majority of people buying a home requires taking a loan for a considerable amount of money on a 25-year mortgage.
Yes the experience can be tasking, but for the majority of Australians, the pros of being a homeowner far overshadow the cons. Therefore, what’s so appealing about it?
Australian renters normally sign up for a 12 or six month lease, ranking the country as having the shortest residential leases in the OECD. In comparison with Northern Europe, renters sign up leases that last a maximum of 10 years.
For tenants, the culmination of a lease can present so much anxiety – especially in regions such as central Sydney or Darwin where affordable housing is very limited.
The anxiety vanishes when you become an owner – there’s no limit on how long you can stay there!
Freedom to decorate
Would you like to use purple to paint the kitchen? How about turning the garage into a billiard room or gym?
As a tenant, you have to secure the landlord’s permission to do a lot of things that could transform the place into a home – even hanging a wall art in another spot!
This is not the case if you own the home. It’s yours to alter and renovate as you like.
Majority of first-time home buyers discover that their mortgage repayments are higher than their previous rent fee, even though the home they bought is smaller.
On the surface that may appear like a losing proposition, but majority of economic studies have discovered Australians are 2.5 to 4 times better off monetary wise as owners instead of tenants.
How come? Simply put, real properties are more likely to increase in faster quicker than inflation and in the long run, the increase on the overall value of your property should outdo your capacity to save.
For example, your $50,000 deposit in the bank would make $2,500 p.a. at 5% interest rates. However, if you utilise the money as a deposit to purchase a $500,000 house which increases in value by 5% you earn $25,000.
Since the 10 year growth average for houses in capital cities is at about 9%, that increase in value should also surpass the taxes, fees and rates associated with owning a home.
The equity nest egg
Equity is the difference between the money you owe on your mortgage and the value of your property – and it is the main element in earning money from real estate.
Equity increases quicker when prices are rising and interest rates are declining or when you pay more on your mortgage.
And equity is a highly convenient financial asset. The equity in your home can be used to assist you in buying an investment, begin a business or as funding for other purposes.
The required taxes
Capital gain is the difference when you sell properties for a higher amount than you paid for them.
Capital gains are fantastic – it indicates you made profit that year, but one disadvantage is that you have to pay tax for it.
But you are exempted if the money earned was from selling your home.
Not like most assets, in Australia money earned from the sale of your main place of residence is excluded from Capital Gains Tax (CGT) under most situations.
Call Annette directly on 0418447856 to discuss your personal needs.