What are the benefits of buying your own home

What are the benefits of buying your own home?

Buying your first home can take a lot out of you. It takes a lot of time to find the right home, and then negotiating with real estate agents and vendors to get the place for a price you can afford can really take a toll on your nerves.

And of course, for most us buying a home means borrowing a big amount of money on a 25 year mortgage.

Yes it can be a trying experience, but for most Australians, the positives of being a home-owner far outweigh the negatives. So what’s the appeal?

Feeling secure Australia has the shortest residential leases in the OECD, with renters typically signing up for a 12 or six month lease. Compare that to northern Europe, where renters sign up for leases that run up to 10 years.

For renters, the end of the lease can bring a lot of anxiety – particularly in areas like central Sydney or Darwin where there is a severe shortage of affordable housing.

That anxiety disappears when you are an owner – you can stay in your home as long as you like.

Read more: Does it make sense to get into the market?

Decorative freedom

Would you like to paint the kitchen purple? How about converting the garage into a gym and billiard room?

As a renter, you need the landlord’s permission to do many of the things that could help make your place feel like home – even hanging a picture in a new spot!Not so when you buy your own home. It’s your castle – yours to change and update as you like.

Growth power

Most first home buyers find their repayments are higher than the rent they were paying, even when the property they buy is smaller.

On the face of it that may seem like a losing proposition, yet most economic studies have found Australians are 2.5 to 4 times better off financially as owners rather than renters.

How is that possible? Simply put, real estate tends to grow in value faster than inflation and over time, the growth on the total value of your property should outstrip your ability to save.Over time, the growth on the total value of your property should outstrip your ability to save.

For instance, a deposit of $50,000 in the bank would earn $2,500 p.a. if interest rates are at 5%. But if you use that money as a deposit to buy a $500,000 home which grows in value by 5%, your gain is $25,000.

With the 10 year growth average for capital city houses sitting at around 9%, that growth in value should also outstrip the taxes, fees and rates you pay as a home-owner.

The equity nest egg

The difference between what you owe on your mortgage and what your property is worth is known as equity – and it’s the key to making money in real estate.

Your equity grows faster when prices are moving up and interest rates are going down or when you make extra payments on your mortgage.

And equity is a very handy financial asset. You can use your equity in your home to help you to buy an investment, start a business or as finance for other purposes.

You can use your equity in your home to help you to buy an investment, start a business or as finance for other purposes.

Not taxing at all!

When you sell assets for more money than you paid for them, the difference is known as a capital gain.

Capital gains are great – it means you've made more money that year, but there is one drawback; the amount you made will be subject to tax.

Except if the gain we are talking about is from the sale of your home.

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