Renting vs Buying: Common Mistakes Lawyers Make

The calculation most lawyers skip

The decision between renting and buying isn't about whether you can afford a home loan. It's about whether buying delivers a better financial outcome than continuing to rent while deploying your capital elsewhere. Most lawyers run the numbers on what they can borrow and what repayments look like, but they don't model the opportunity cost of tying up capital in a principal residence versus keeping it liquid or invested.

Consider a senior associate earning $180,000 who has saved $150,000. She can afford to buy an apartment in her preferred inner-city location, but the mortgage repayments would be $700 per fortnight higher than her current rent. The question isn't whether she qualifies for the loan. It's whether the difference between those repayments, plus the upfront costs of buying, plus the foregone return on her deposit, is justified by the equity she'll build and the capital growth she expects.

Opportunity cost on a deposit you've already saved

When you put down a deposit, you're locking that capital into an illiquid asset. If you're in a profession where LMI waivers allow you to borrow at 90% loan to value ratio without paying Lenders Mortgage Insurance, the deposit required might be lower than you expect, but it's still a material sum. The trade-off is what that money could have earned elsewhere.

In our experience, lawyers often underestimate how much their savings could compound if left invested while they continue renting. A $150,000 deposit invested in a diversified portfolio at a conservative return will generate income and growth that needs to be factored against the equity you'd build through mortgage repayments. The equity you build in the early years of a principal and interest home loan is modest because most of your repayment goes toward interest. You need to compare the actual equity gain, not the total repayment amount, against the return on capital if you stayed renting.

Repayment vs rent: the real comparison

Comparing your monthly mortgage repayment to your monthly rent is not comparing like with like. The repayment includes a principal component that builds equity. The rent does not. But the repayment also includes interest, which is a pure cost just like rent.

If your mortgage repayment is $3,200 per month and $2,100 of that is interest, you're paying $2,100 for the right to live in the property and $1,100 to reduce your loan balance. If your rent is $2,400 per month, the actual cost difference is $2,100 versus $2,400 in favour of buying, not $3,200 versus $2,400 in favour of renting. The $1,100 principal repayment is forced savings. Whether that forced savings mechanism is valuable depends on your financial discipline and alternative uses for that capital.

Offset accounts and effective interest rates

A mortgage offset account changes the comparison because it lets you reduce the interest you pay without locking funds into the loan itself. If you're holding $80,000 in savings and your loan balance is $500,000, the offset account means you're only paying interest on $420,000. The savings remain accessible.

This feature is particularly relevant for lawyers who receive irregular income such as performance bonuses or settlement payments. You can park those funds in the offset, reduce your interest cost immediately, and withdraw them later without restriction. The effective interest rate you're paying falls, which narrows the gap between the cost of owning and the cost of renting. When comparing a variable rate home loan with an offset account against renting, calculate the interest cost after accounting for your average offset balance, not the headline rate on the full loan amount.

Build equity vs portfolio flexibility

Buying a home builds equity, but it also reduces flexibility. If your career involves potential interstate moves, secondments, or shifts between firms, owning a property in one location creates friction. Selling involves agent fees, legal costs, and the risk of selling into a weak market. Renting preserves mobility.

A barrister we work with regularly chose to continue renting in Sydney's Inner West while purchasing an investment property in Brisbane. His view was that he wanted exposure to property but didn't want to tie himself to a specific suburb in Sydney given the uncertainty around chambers location and the possibility of a future move. The investment loan was structured as interest-only, which kept his repayments lower than they would have been on an owner-occupied loan, and the rental income from the Brisbane property covered most of the loan cost. He's still renting in Sydney, but he's building equity in an appreciating asset without locking himself into a specific postcode.

The tax position on owner-occupied vs investment debt

Interest on an owner-occupied home loan is not tax-deductible. Interest on an investment loan is. For a lawyer on the top marginal tax rate, the after-tax cost of investment debt is materially lower than the pre-tax cost. This shifts the rent versus buy calculation if you're willing to consider buying an investment property while continuing to rent where you live.

If you're paying $2,400 per month in rent and contemplating whether to buy a principal residence or continue renting, the alternative worth modelling is buying an investment property elsewhere and claiming the interest, depreciation, and other costs against your income. The rent you're paying remains non-deductible, but the investment loan interest is deductible, and you're gaining exposure to capital growth in a market you select based on value rather than proximity to your workplace. We regularly see this approach among lawyers who value living in expensive inner-city areas but recognise that buying in those areas offers poor rental yields and modest growth prospects compared to other markets.

Upfront costs and breakeven timelines

Buying a property involves stamp duty, legal fees, building and pest inspections, and lender costs. In New South Wales, stamp duty on a $900,000 apartment is approximately $35,000. Add another $3,000 to $5,000 for legal work, inspections, and loan establishment. You're committing close to $40,000 in costs that deliver no ongoing value and are lost if you sell.

Those upfront costs need to be recovered through capital growth and the equity you build via repayments before buying becomes financially superior to renting. If you sell within two or three years, the combination of entry costs and exit costs such as agent fees often exceeds the equity gain. The breakeven timeline depends on the growth rate of the property and the gap between your repayment cost and your rental cost. In slower growth markets or where your rent is well below what a mortgage would cost, breakeven can extend beyond five years. That timeline matters if your career, family, or lifestyle circumstances might change in that period.

Income volatility and loan serviceability

Lawyers in salaried roles have stable income, but barristers, contractors, and those in smaller practices can face income variation. Lenders assess borrowing capacity based on your income history and structure. If you're self-employed or operating through a trust or company, the assessment process is more involved and your borrowing capacity may be lower than it would be for the same income earned as a PAYG employee.

If you're in a role where income is variable or you're planning a transition such as moving from employment to the bar or starting your own practice, the timing of when you apply for a loan matters. It's often easier to secure pre-approval while you're still in a salaried position, even if you don't plan to buy immediately. That pre-approval gives you certainty around what you can borrow and locks in your serviceability assessment before your income structure changes. It also clarifies whether buying now makes sense or whether continuing to rent while your income stabilises is the lower-risk path.

When renting makes more financial sense

Renting makes sense when the cost of ownership exceeds the cost of renting by a margin that isn't justified by the capital growth you expect, when you value flexibility over equity, or when your capital can generate a higher return elsewhere. If you're paying $2,200 per month in rent and buying an equivalent property would cost you $3,800 per month in repayments plus $400 per month in strata fees, rates, and insurance, you're paying $2,000 per month more to own. Even accounting for the principal component of your repayment, that's a significant gap.

If property prices in your area are growing at two or three percent per year, the capital growth won't close that gap quickly. You'd be better off renting, investing the difference, and waiting for either your income to rise, property prices to correct, or a different opportunity to emerge. The decision isn't binary. It's a question of timing and whether the current market conditions and your current financial position align.

If you're weighing up whether to continue renting or commit to a purchase, call one of our team or book an appointment at a time that works for you. We'll model both scenarios using your actual income, deposit, and the property type you're considering, and show you what the comparison looks like over different timeframes.

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