Falling property prices have renewed the debate about renting versus buying a home. What are your views?

Listen up: If rent money is “dead” money, it’s no more “dead” money than mortgage interest.

So, that is what you compare. Short term, renting is far cheaper. Long term, however, buying … kicks … ass.

Let’s assume two identical houses, side by side. One is up for rent, the other for sale. The rent is $1670 a month. The mortgage (assuming 7 per cent, 25-year loan) is $3280 a month, or nearly double.

The mortgage will bounce around with interest rates. Rent will rise with the value of the property (assumed 5 per cent). Now, let’s compare the “dead” money.

After 25 years, the total rent bill will have been $954,000. The buyer has paid about $458,000 in interest.

After maintenance, let’s say the buyer is ahead $400,000. But she also owns an asset worth $1.7 million. The benefits are exponential from there.

“If you decide not to buy, you will rent until you die.” Catchy tune, hey?

In year 26, the renter will be paying $67,000 a year. The buyer will be paying … nothing. Well, some rates and maintenance.

I’m a fan of buying when you can afford to. Whether prices are high, or low, is less important than starting the mortgage habit.

If you’re the sort of person who thinks beyond your next few pay cheques, the buying versus renting argument isn’t a fair one.

Nationally, prices have fallen around 5 per cent in the last year. Add inflation and they’re down 8 per cent.

Low home prices are just a bonus. But a bonus worth taking.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.

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