Better to save up or buy now?

Rent and save

There are definitely benefits to renting. You don’t have to worry about maintenance, rates and ongoing mortgage payments, or spend weekends combing the local hardware store for matching paint or a new lawnmower and edger. And if you decide to go overseas for a couple of years, you can just leave.

On the other hand, you might find it difficult to save as much and as quickly as you’d like. And if prices in that dream suburb are rising faster than your savings, you’re not really getting ahead. On top of that, you can’t hang things on walls or change the carpet – it’s your home, but only so long as it’s okay with the owner.

Buy less, own now

One way to get into home ownership is to buy a property you can afford now, even if it’s not your dream home.

Do you need a house? Units are less expensive, so ask yourself whether you really want the garden and spare rooms. Alternatively, if the best suburb is out of your range, look in surrounding suburbs that might be more affordable.

Another benefit of owning is that when it’s time to upgrade, you can either sell the property or keep it as an investment and use the equity on a new home.

The downside of buying smaller, however, is that space will get tight if you plan to have children in the next few years.

Do the numbers

Work out how much you have saved for a deposit and what you can afford to pay each month, as well as your eligibility for any first home buyer grants.

The deposit is usually around 15-20 per cent of the value of the property. Some lenders will allow a smaller deposit so long as the loan is covered by lenders mortgage insurance (LMI), but that can be an expensive way to do it.

As a general guide, your monthly mortgage repayments should be less than or equal to around 30 per cent of your gross monthly income. When calculating what you can afford, take into account existing expenses such as credit card debts, student loans or car payments, as well as additional home buyer costs.

If you find that the only properties you can afford right now are in areas that don’t appeal to you, consider buying one as an investment and take advantage of the tax benefits while you rent and save for your dream home.