To rent or buy, how do the costs compare?

An aerial view of houses in Australia.

You may be at that point in your life when you’ve started to think seriously about buying a home. Maybe you’ve rented for a number of years now and you’re tired of handing over your hard earned dollars to someone else. That said, the thought of having to take out a home loan can also be quite daunting.

We’ve taken a look at the cost of renting and buying, to help you weigh up the pros and cons of both.

Paying rent

As of January 2021, the average price to rent a house in Australia was $487 per week, that’s according to SQM Research. Now, if you’ve been a renter for a while, you’ll know that there are a few ways landlords or real estate agents can work out your monthly rent. One way  is to divide the weekly rent by 7, then times it by 365 and divide again by 12. 

By that calculation the average price to rent a house in Australia would be:

  • around $2,116.12 per month 
  • and approximately $25,393.44 per year.

Of course that figure may vary dramatically depending on where you live. For instance, in Adelaide the average weekly asking rent for a house is $424, whereas in Canberra it’s $658. 

Other costs

Other costs associated with renting include:

Costs that do not usually come with renting are:

  • home building insurance
  • the cost to make repairs to your home 
  • and water rates (that is unless your water supply is metered, then you may have to pay for this yourself)

Restrictions

Of course one of the cons of being a renter is that you can’t make any changes to your home. This includes painting the walls, doing renovations or possibly even adding picture hooks. In most cases you won’t be able to have a pet either, unless the owner allows you to.

Paying back a home loan

In comparison, SQM Research shows that the average house price in Australia is currently around $633,998. So, assuming you have a 20% deposit saved, you would need to borrow approximately $507,198. 

Now if you are buying the house to live in, then you would take out an owner occupier home loan. That is as opposed to an investment loan, which would apply if you were investing in a property to lease. With an owner occupier loan you will generally be paying back the principal (the amount that you actually borrowed) and interest on top of that.

So in the example above, the average monthly repayments would be around $2,002 per month. That’s with:

  • an average variable home loan interest rate of 3.28% (that’s according to information available in the Mozo database^)
  • a $507,198 loan
  • and a loan term of 25 years

In this scenario the average cost to buy a home is less than the average cost to rent a home in Australia. However, this is only an average, house prices vary dramatically across the country. For instance, in Sydney the average house price is currently $1,372,623, whereas in Hobart it’s $611,049. It is also worth remembering that interest rates can change and rent prices can go up and down.

You can use the Mozo home loan repayment calculator to work out an approximate of what your monthly bill might be. 

Other costs

Depending on the loan you opt for, you may have to pay some other fees. These can range from one-off fees such as an establishment fee to ongoing fees such as a monthly service fee. If you have less than a 20% deposit, you will usually have to pay lenders mortgage insurance on your loan as well.

Besides the cost of the home loan, other costs include:

  • a stamp duty transfer fee
  • home building insurance
  • water and homeowner rates
  • paying for repairs
Infographic comparing the average cost to rent, versus the average cost to buy a home in Australia.
Please note: This scenario is based entirely on averages and as such only gives a general idea of the comparison between the cost to rent and the cost to buy a house in Australia.

Weighing up the options

As you can see, unless you have the money to buy a property outright, there are ongoing costs involved in both renting and buying. Both of which involve making regular payments. 

The difference is that when you buy, you are working towards paying off a loan. Plus, if you buy your own home you will be able to make the modifications you wish. Although on the flipside of that you will be responsible for repairs, homeowner rates and water rates.

There are pros and cons to both buying and renting. It really comes down to where you are at in your life. Whether you want the responsibility that comes with a loan or not. Or, whether you’re ready to have your own space and alter it to your heart’s content. 

If you are looking to buy and you need a way to finance your future home, why not head to Mozo’s compare home loans page. Or, take a look at the loans on offer below for an idea of what interest rates are available right now.

^Average percentage calculated from information available in the Mozo database, correct as of 28 January 2021.

*Based on statistics from SQM Research, correct as of January 2021.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 15 June 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.