However, my SO is very concerned that we are losing out on the chance to build equity, and feels like rent is throwing money away.
I used to think this way, but it is wrong.
Consider four scenarios:
(1) You rent a $200k house for $200 per week.
(2) You own a $200k house with $200k owing, and pay $200 a week in Interest.
(3) You own a $200k house outright, with $0 owing. You lose $200k per week in opportunity cost of having $200k tied up in that building. If you moved back in with your parents (free accommodation), you would receive $200 per week from a tenant. If you moved back in with your parents and sold the house, you would receive $200 per week in dividends from your $200k of shares.
(4) You own a $200k house with $50k owing, and $150k of ownership. You pay $50 a week in interest, and "lose" $150 per week in opportunity cost.
Therefore: Rent is not "throwing money away". That sentiment is a marketing scam, similar to the price of diamonds. renting and owning both require "rent" to be paid.
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now, rent or buy, that is a very simple question from a financial perspective. (there are also emotional considerations)
1. Chooose a house.
2. Discover the annual rent: $X
3. Discover the Price - multiply by entire price by the current mortgage interest rate. Add mortgage fees, add Body Corporate (HOA) fees, add land tax, rates, repairs, maintenance, etc. Add an annualised amount for transaction fees (stamp duty), and agents fees. This = Y.
4. Ignore capital gains. If you rent and invest in shares, you will also get capital gains.
If X>Y, buy. If Y>X, rent.