How to choose between renting and home ownership in a hot market

Making the choice between renting and buying is often hinged on the rental cost in a now-inflated market versus what it will cost a person to service a home loan.

SMS Finance director Brenden Brial says on the Coast there are still plenty of people looking to buy as home loan repayments can be “less or equal” to what they are paying in rent.

It’s this thinking that is keeping him busy along with people looking to improve their interest rate arrangements and those wanting to take advantage of the increase in property prices by getting into an investment property.

While there is still FOMO activity out there, Mr Brial is also occasionally hearing people say they are willing to wait until the market sees a correction.

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Both the Queensland and Federal governments’ first homebuyer incentives are continuing to drive the Coast property market. But, land availability to build on remains a light brake on the market.

“The land developers like AVID and Stockland just can’t keep up with the demand for the land,” Mr Brial says. And by the time more land gets released, the interest rates may have moved up.

As to how long the low interest rates are going to last, Mr Brial says it’s hard to tell.

There has been some recent upwards movement in fixed rates.

“With the banks, fixed rates are quite often a function of their balance sheet management in so far as what deposits they have and what long term thoughts or predictions on what interest rates are going to do,” Mr Brial says.

So, shopping around for the best loan package is a must.

And before you leap into a home loan, Mr Brial says, “you don’t want to be fixing an interest rate for five years if you plan on upgrading or relocating in three years. You could end up with some pretty hefty break costs.”

Avoiding being blinded by the great offers out in the market is wise including avoiding using a cashback as an incentive for changing a loan.

“You need to be in front of the product or interest rate you are moving to before you take into account the cashback,” Mr Brial warns.

Another catch he notes for borrowers is knowing a lender’s current timeframe for processing home loan applications.

“There are some banks out there that are upwards of 20 business days before they pick up your application,” he adds.