Rent isn't always 'dead money'. Here's why

Owning your own home can give a welcome sense of security, but the jury is out on whether it's the best money move.

We all need somewhere to live and putting our savings into a place we can call home feels like a no-brainer.

Setting aside woeful housing affordability, owning your own home can have five financial downsides.

When you buy a home with a mortgage, you need a deposit.

You can get low deposit loans and there is government assistance, but the rule of thumb remains: a 20 per cent deposit means avoiding lender's mortgage insurance.

If you're getting an average loan — $730,720 in Australia in 2026 – $182,680 would represent a 20 per cent deposit. Adding the mortgage to the deposit, the property price would be around $913,000.

If you're up for stamp duty, you'll need $22,334 if you're a first home buyer in Sydney, for example. It could be as much as $49,850 in Melbourne.

With the cost of conveyancing, building and pest inspections, title searches and a mortgage establishment fee, you can expect to set aside at least $206,000 from day one.

Buying a home means giving up the chance for that cash to grow through investing.

You're hoping the home will go up in value too, but it's harder to access while you're living in it.

Not only have you locked up cash, but it's likely you'll also pay more per week to own than rent initially.

For a $730,720 loan, the monthly minimum repayment would be $4,494 per month – or approximately $1,037 per week – if it's a 30-year loan at 6.24 per cent interest.

If you compare the mortgage repayment with the rent for a sample suburb in each capital city where the median house price is close to $913,000, you're likely to pay between $141 and $490 a week more for the mortgage than you would rent at the start.

Owners also pay things such as council rates, building insurance, maintenance and strata fees.

Assuming 20 per cent on-costs, the gap between renting and owning becomes $348 to $697 a week more expensive to own at purchase.

That gap should close eventually as rents rise. When it does, the cost to rent the same home will outstrip the mortgage and on-costs for the remaining period of ownership.

You're not only paying more until it does, but you're also forgoing the opportunity to invest that $348 to $697 a week on top of the $206,000 you locked up.

The maths only works on owning over renting if you stay in the home once theoretical rent outstrips the mortgage.

If you move, incurring agents' fees on the sale and another round of stamp duty along with a new (often larger) mortgage, the maths can reset and you lose some or all the ground you've gained.

Locking yourself into home ownership before deciding where you want to be based long term can tip the maths in favour of renting.

But all this pales in comparison to the biggest upcoming risk.

Given homes are so expensive, they inevitably form a significant proportion of your financial assets.

Because they mostly need debt, there is added risk compared to an asset that you own outright: you might end up owing more than the home is worth, known as negative equity.

This has been rare in Australia given how fast house prices have been rising, but it may be in the post for one in 11 properties forecasted to be uninsurable by 2030. It was one in 25 just four years ago.

If you can't get building insurance, the bank won't approve a mortgage. This means potential buyers must pay cash only.

Cash-only buyers are a much smaller pool than buyers in general, so the advantage in property negotiations may move to the buyer's side.

It means those property prices are likely to drop.

This is a rapidly rising risk in Australia and could tip the balance more firmly back in favour of renting, especially in areas exposed to natural disasters.

No. The security of having your own home is hard to beat.

This is as much a question about how well you sleep at night as it as about money.

With Australia's age pension sitting close to our (unofficial) poverty line, it's hard to argue against home ownership in retirement.

It also doesn't preclude property investing while renting, known as rentvesting.

You can get a foot on the property ladder with a view to eventually either living in the investment property or selling it to help fund a home.

The leverage that threatens negative equity can also work in your favour, with growth potentially outstripping what you'd earn on an investment elsewhere.

Don't fall for the "rent is dead money" schtick. You need shelter the same way you need food, and we don't call grocery bills dead money.

Older generations swear by home ownership partly because they're already on the property ladder, and it's likely they got on it well before house prices escalated in comparison to wages.

Lacey Filipich is a financial educator and the author of Money School.

This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.