- Renting a property requires you to pay one month’s rent (sometimes more) up front. This deposit is returned to the tenant when they vacate the property.
- The landlord is required by law to invest this deposit in an interest-bearing account, with interest accrued being owed to the tenant. However, the cost of any repairs the landlord has to conduct for damage caused by the tenant is deducted from the deposit.
- Buying a property instead of renting offers the option of acquiring a 100% home loan, which means you’ll be able to move into a property without having to pay a deposit.
Most people are aware that an upfront deposit is usually required to buy a house. But they may not be aware that renting a property requires a deposit as well.
What you need to know about the rental deposit
Of course, there are some differences. Rental is temporary, so the deposit will be returned to the tenant when they vacate the property.
Other need-to-know information about the rental deposit:
- The rental deposit is usually equal to one month’s worth of rent, although it might be more. The landlord and tenant will agree on an amount.
- The landlord is required by law to invest the rental deposit in an interest-bearing account. Any interest accrued is returned to the tenant along with the deposit when they vacate the property.
- Any repairs the landlord has to carry out during the tenancy is deducted from the deposit.
- The landlord is required to provide the tenant with a receipt listing the date of the deposit, and the amount. The tenant is also entitled to request written proof of accrued interest.
- When the tenant ends the lease, the landlord has 21 days to inspect the property and determine the cost of any repairs or other expenses that need to be deducted from the deposit, for any damage caused by the tenant.
- This inspection has to be conducted while the tenant is present. Failure to do so means the property will be assumed to be in good condition, requiring the landlord to return the deposit without the right to dispute.
- The tenant may lodge a complaint with the Tribunal if the landlord refuses to return the deposit, although the landlord can counter-claim if the amount owed by the tenant exceeds the deposit.
Buying versus renting
With this information in mind, is it worth it to rent a property rather than buy? Buying carries the following advantages:
- The option of obtaining a 100% home loan ie. a home loan that does not require a deposit, whereas rental usually requires you to make an upfront deposit.
- In many cases, your rent is being used by the landlord to pay off a bond on the property. Buying a property means you’ll be using that money to pay off your own bond rather than someone else’s.
- Renting may cost you less in the short-term, but in the long-term paying off a bond means you will be working toward ownership of a property, which serves as a valuable asset.
If you’ve had enough of renting, and have decided to purchase a property instead, bear in mind that ooba Home Loans offers a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
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