The short answer is yes “in some cases” but to answer this question accurately, there are probably a few more questions we should address first…
- Which suburb are you buying is, and what is the type of property you’re looking at?
The reason this is important is because the “rental yield” (the measure of the annual rent divided by the property value) in that suburb will determine how much you pay in rent vs how much you pay as a mortgage.
For example, if you buy a house in Pemulwuy, the median house price is $860,000 and the rental yield is 3.8%. This means for your average home you’re likely to pay around $635 per week.
If you have an 80% loan against this property you would be paying approx. $643 per week on a principal & interest loan with a rate of 2.7%, leaving you around $8 per week worse off If you buy than if you rent.
Compare this with a much higher yielding suburb and property such as a unit in Penrith, and you’re looking at a median price of $430,000 with a 4.5% yield. The rent would be around $375p.w. and the repayments on an 80% loan would be around $321 per week, leaving you around $54 “better off”.
- How much is your deposit vs how much you’re borrowing?
This is also going to make a big difference. If you have a smaller deposit, your interest rate could be higher with less lenders available, there could be mortgage insurance and you’re obviously borrowing more.
If we look at the Penrith unit for example, an 80% loan at 2.7% might be around $321 per week, although a 95% loan plus mortgage insurance with a higher rate of say 3.3% might get you closer to $412 p.w. In this case, it would cost around $40 more to own.
If you qualify as a first home buyer though, there is the First Home Loan Deposit scheme available which could have fixed rates as low as 2.29% with no mortgage insurance, so you could be looking closer at $362 per week, and only need deposit of around $25k including most, if not all of the costs (Amazing, I KNOW!).
- What type of loan are you getting?
The jury is still out on whether to fix or not, but with a 2 year fixed rate with ING of 2.09%, it’s certainly very tempting! Even buying in a lower yielding suburb like Lane Cove with a median unit price of $810,000 could end up very close to break even. An 80% loan would attract repayments of around $559 per week based on a 2.09% fixed rate, vs the median rent of $540 per week.
There are of course a lot of things to think about before buying, and the cost is never just the repayment. You need to factor in things such as maintenance, strata fees, insurance etc.. although there is no doubt that it’s never been more affordable to have a mortgage than it is now.
If you’re thinking about buying, feel free to get in touch and we can discuss your plans in more detail: 1800 3 PEASY