If you’re thinking about making a move, you’ve probably considered whether you should buy a home or if it makes more sense to rent. Choosing between the two isn’t as simple as it appears. Renting and buying each have their advantages and disadvantages and your particular personal and financial circumstances will play a significant role in your selection. Is getting a mortgage better for you vs renting?
However, there are a couple of points to keep in mind that will help you decide whether purchasing or renting is the best option for you right now. The easiest approach for us to frame our recommendations is to start by listing the pros of each solution. Let us investigate.
Advantages of Renting a House
1. Reduced transaction expenses
If you decide to rent, you will almost certainly be required to put down a deposit before you can move in. While this is a substantial sum of money, it pales in comparison to the expense of buying a house.
Stamp duty, surveyors’ and solicitors’ costs, not to mention the substantial mortgage deposit, must all be paid when purchasing a home. Choosing a tenancy, on the other hand, greatly reduces your upfront costs.
The costs of renting is usually cheaper than buying a home particularly in the short term.
2. Reliability
When you’re renting, your monthly expenses are significantly more predictable than if you owned your own house. The rent payment will be confirmed in the tenancy agreement and the monthly payments that you need to pay will be consistent. Repairs and replacements will be the responsibility of your landlord, so when you rent property you don’t need to worry about whether you are able to afford the property maintenance if say the roof was leaking or the boiler was not working. Therefore if you are on a limited budget, renting a home may be the best option for you right now.
3. Adaptability, renting gives you flexible options.
If you want to move house for employment or education opportunities in the near future, renting could mean it is easier to move. Many leases have a 6-month break provision, which allows you to either move elsewhere or buy in the area where you are renting if you believe the time is appropriate. It can be easier to rent if you are not ready to buy yet. Even if you are looking to buy in the longer term, if you are going to be buying property in an area you are unfamiliar with you might be better to rent first to check that this is really the area you want to be in before committing to homeownership.
4. Less responsibility and danger
As a tenant, all you have to worry about is paying rent, which covers the majority of your financial obligations. There’s no need to be concerned about interest rate increases altering mortgage repayments, or worse, not being able to meet your monthly mortgage payments, which could lead to the loss of your property. The costs of renting is usually cheaper than buying a home particularly in the short term.
Buying a Property
1. You are making an investment.
If you choose a repayment mortgage over an interest-only mortgage, becoming a homeowner means you will be investing in what will eventually become a valuable asset for you and your family. One of the disadvantages of renting is that while paying off your landlord each month when renting may be convenient, but it is also widely viewed as ‘dead money’ because you will receive no benefit from it other than a roof over your head for that month.
Of course, the value of your home can fluctuate, but house prices are rising and after your mortgage is paid off, you will have something substantial in your hands. Those who choose to rent, on the other hand, will never stop paying a significant portion of their income on their monthly rent.
2. Constancy of homeownership
Owning a home provides a certain level of security versus renting. Anyone who has had a cheerful landlord call them out of the blue and drop the bombshell that they must vacate their property in two months will understand what we mean.
This is the bad opposite of the previously mentioned flexibility benefit of renting vs buying. Owning a property implies that it is yours, and no one may force you to leave at any time.
3. You make the decisions, buying gives you more options.
Another perk of owning your home is that you can do whatever you want with it (within reason and the tolerances of your local authority’s planning division!). Any improvements that you make can also then benefit you by adding to the value of your property. If you decide to sell the property then who wouldn’t want the amount the home is worth be anything but the optimum property prices for that type of property. You may have been told that buying is more expensive but homeownership means that if the value of the property goes up from any changes you make, that investment comes back to you not a landlord.
Do you want to paint the living room a bright green? Strike yourself out. Do you need to build a dozen shelves for your miniature Dalek collection? You may proceed. You are free to do whatever you choose. This may not be the case when renting.
One of the cons of renting is that adaptations and even keeping pets is frowned upon if you rent, but owning your own house provides you far more freedom to be yourself.
4. More affordable
In the long term owning property is better than renting because it’s cheaper. Despite the fact that it may be cheaper to rent in the near term, buying your own house is likely to be the most cost-effective alternative in the long run.
If you discover the perfect mortgage deal when you move in, the cost of buying can be much lower if you know you will be settling down there for some time. If you are lucky enough to secure a mortgage where the repayments are less than a month’s rent it’s better than renting. Renting is more expensive in this instance, which would make renting a less desirable option.
A difference between when you buy and rent is that rental hikes can be common, however, the amount of interest you pay will drop as the term of your mortgage shortens and you get closer to the day when you can finally say that you own your own house. This further contributes to buying a house being cheaper than renting in the long term.
Other factors to consider, which is the better option, renting or buying?
You should have a clearer notion of which option will suit you best now that you understand the pros and cons of buying or renting a property. However, if you believe you should buy, there is one more thing you must ask yourself to ensure that your decision is the best one for you:
What kind of savings do I have? Are they enough for me to be able to afford to buy?
This is the proverbial elephant in the room, and it is often the stumbling block for individuals looking to jump on to the property ladder. If you want to buy your first house, you will almost certainly need at least 10% of the property’s value in savings.
There are methods to obtain a home for less, such as through one of the government’s first-time buyer aid programmes, but for people trying to buy your first home without assistance, 10% is the very minimum deposit required for obtaining the mortgage required towards owning your own home.
Another factor to consider when looking at your savings is the amount of money left over after you have made your deposit. Unfortunately, the costs of purchasing a property do not stop with the deposit and the mortgage. Other costs, like Stamp Duty, legal fees to pay, and even relocation costs, must also be considered.
One of the few disadvantages of buying a home is that purchasing property can be complicated. The finance chain sometimes involved in the exchange of property may mean that you find that renting is a more suitable option in the short term until all finances are properly in place. Property values, the cost of buying a house and whether your savings are enough to buy a home that is the right one for you, will be key factors that determine whether you are better to rent or buy.
Which is the better option, renting or buying? – Conclusion
As we indicated at the beginning of this discussion, only you know your specific personal circumstances, and only you can decide whether to buy or rent a house. However, with the information shown above, you will be in a much better position to decide whether to rent or buy. Whichever option you choose, whether you rent or buy a house being informed will help you to achieve your desired goal and live in the property that is right for you.
