Costs for Tenants and Homeowners - Is It Better to Rent or to Buy?, Property 101 Rent Vs Buy Guide
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Costs for Tenants and Homeowners

Timeline costs for Tenants and Homeowners

Most of us, at some point in our lives, will have to decide whether to buy or rent a home. The decision that is then made is often based on the financial factors involved over a long-term period. Here is an overview of all the costs incurred for both a Homeowner and a Tenant.


When entering the property market, those wishing to rent a property will be faced with very low start-up costs compared to the big upfront expenses involved in buying property.

When choosing to buy or rent a home, look at all the financial factors involved over a long-term period for both a Homeowner and a Tenant.

At the start of the first month of renting a property, a tenant will be expected to pay a deposit and the first month’s rent. The deposit is held as surety and can be used by the Homeowner to cover outstanding rental costs or damage caused to the property during the lease term. The value of the deposit is at the discretion of the Homeowner, but usually ranges from 1 to 3 months of the rental amount.

When buying property, the new Homeowner will have to cover some initial costs including a home loan deposit, property registration fees, Bank fees and Estate Agent fees. The value of the deposit is very important for a first-time Homeowner, as it directly impacts the home loan repayment amount, and therefore the monthly instalments due. The greater the deposit saved, the lower your monthly bond repayments will be. The overall start-up fees may seem high at first, but one must take into consideration that these fees are once-off amounts and are the initial costs involved in paying towards your own profitable, long-term investment.

Annual costs

The yearly costs for those who rent and those who own property may vary.

A Tenant is required to pay rent on a monthly basis as stipulated on the lease agreement. The duration of a lease may vary, but will often range between 6 and 12 months. After this time, the Tenant will be required to renew the lease contract, which will likely be subject to an increase in rent. This increase in rent usually varies between 5% and 10% of the rental amount, and is normally implemented based on a 12-month cycle.

In comparison, a Homeowner is required to pay monthly bond repayments. The total repayment amount is based on several factors, such as the property price, deposit amount, duration of the loan, and interest rate offered. The duration of a loan is typically 10, 20 or 30 years, and the value repayable can be affected by fluctuations in the interest rate during this time. Unlike a Tenant's rental payments, the Homeowner’s annual bond costs accumulate equity over time, and are tax deductible, ultimately resulting in a saving.

The Homeowner is directly responsible for paying the levy and utility costs of a home and these include water, rates and electricity. However, when renting, while water and rates costs are usually included in the monthly rental amount, the monthly electricity fee is an additional payment for the Tenant’s account. The inclusion of these costs in the rental price is at the discretion of the Landlord. Additional costs incurred by a Homeowner are those involved in the general maintenance and repair of a property.

Both Tenants and Homeowners have the option to make use of additional services, and these will be at their own cost. Such services include internet and telephone, insurance for household contents and security fees.

When moving on

When a Tenant chooses not to renew the lease contract, the deposit amount may be paid back. This will be at the Landlord’s discretion based on any outstanding rental due or damage to the property that was as a result of the Tenant’s negligence. A Homeowner who decides to sell a property can potentially make a profit from the proceeds of a sale as a home generally appreciates in value over time.

When considering the actual long-term costs of both renting and buying, you will find that rental costs often accumulate and are higher than that the costs involved in home loan repayments. This is because there is never an end to large monthly payments with renting, and the amount will continue to increase as time goes on. However, a home loan will come to an end at which point the Homeowner will no longer have to make large monthly home loan payments, and they will have a valuable asset to their name. This is why renting is only a viable short-term option and buying is a long-term investment option.

When looking at renting or buying as a whole, the costs involved may be an important aspect, but your decision will also largely rest on the security homeownership offers compared to the freedom of renting, and which of these suit your needs.

When choosing to buy or rent a home, look at all the financial factors involved over a long-term period for both a Homeowner and a Tenant.

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