Young adults ask me this all the time (that includes my own adult kids): should I buy my home or keep renting? It is rarely a simple yes or no. It is more about timing and what your budget can carry without stress.
Here is how I walk through it, both with my past clients and in my own life.
Start with three questions
- How much would I need to borrow?
- Can I afford the repayments now?
- Will this limit my options later?
Those questions keep your feet on the ground. They also help you spot the traps that lead to debt stress.
Get your assumptions straight
House prices do not rise in a straight line. Neither do wages or interest rates. People often guess at growth and then build their plan on a guess. Better to look at long-term trends, then decide if your plan still holds up.
Do the math, then stress test it
If interest rates rise by 2 to 3 percentage points, what happens to your budget? Can you still make repayments, save a little, and live a normal life? A good mortgage broker can show you the scenarios.
The most common mistake I see is borrowing the maximum the bank offers. A better way is to plan for higher rates, then check the impact on your household budget. If the plan breaks under stress, the loan is too big.
Rent is not “dead money”
People say rent is dead money. Interest is also money that never comes back. So compare rent over the same period with the total interest you would pay on a loan. Over a long mortgage, interest often adds up to more than you expect.
A clear example at 7%
Let’s say you borrow $500,000 at a fixed 7% rate for 30 years (not counting for other potential bank fees).
- Monthly repayment: about $3,325
- Total paid over 30 years: about $1,197,000
- Of that, interest is about $697,000
That is almost seven hundred thousand dollars in interest on top of the money you borrowed. It is a big number, and it should give you a clear baseline to compare with renting.
About house prices and income
Over long periods, home prices tend to move in line with inflation and income growth. Some years run hot, some cool. For prices to keep rising fast, incomes need to keep up. If not, affordability breaks, and demand slows. That is why buying on the belief that prices always double every 7 to 10 years can backfire.
Is a mortgage “forced saving”?
People call it that, and for many it is true. But you can build the same habit by saving on purpose. Saving first gives you options later, like choosing a cheaper area, a smaller loan, or even a debt-free home with a bigger deposit. Debt-free living reduces stress and gives you freedom. I have seen it save marriages and sleep.
A simple plan you can use
- Run the numbers at today’s rate, then add 2 to 3 percent.
- Check the new repayment against your budget.
- Add rates, insurance, maintenance, and closing costs.
- Compare the total cost of owning to renting over 5 to 10 years.
- If the plan only works in perfect conditions, scale it back.
Bottom line
Both renting and buying can be wise. The best choice is the one your budget can carry in good times and hard ones. Run the math, stress test it, and pick the path that gives you peace and margin.
