Buy or rent?
Buy or rent?
Work out which is right for you
Are you ready to build up a deposit and take out a mortgage? Or is renting still better suited to your circumstances? Here’s our guide to help you decide your next move.
It’s a moment to savour for any new home buyer – when your rent money finally stops paying off a landlord’s mortgage and instead starts to repay your own.
No more handing over a monthly sum to live in somebody else’s flat or house. From that day on, you’re in charge with all the responsibility (and hoped-for reward) it can bring.
But buying a home for the first time can also feel like a big leap of faith, an unfamiliar sense of the unknown. And a good deal of this is down to the familiar habit of renting itself.
For many, it’s a first taste of adult life as you learn how to look after a home, take care of bills and live on your own or with friends. Renting is also a very convenient (and affordable) way to live in a city or town when you start work, or move to a different part of the country.
Yet the longer you rent, the more it can start to feel like an unwanted expense – one where you spend on a service rather than invest money in a home.
It’s why climbing onto the property ladder remains such a popular ambition. Pay off a mortgage and you own a property you can then keep, sell or pass on to family. You’ve also got security and the potential to boost your wealth if house prices rise.
Of course, the question of ‘is it better to rent or buy?’ is nowhere near that simple. Your decision will likely be made up of many influences. These tend to include a mix of – among others – how your personal finances are doing, job prospects, life plans, family (and friends), responsibilities, the ups and downs of the UK housing market, and the health of the economy to boot. That’s quite a list, and it’s not even remotely exhaustive!
To help you work out what’s right for you, we’ve listed some of the pros and cons of a decision to rent or buy a house – and why they matter. Not all will relate to your circumstances, but they should be able to act as a guide for your next move.
The pros of buying a home…
- Every mortgage payment brings you closer to ownership. You repay a loan in return for becoming a home owner, instead of paying out rent indefinitely.
- Security can give you peace of mind. No need to worry about a landlord raising your rent, failing to renew your tenancy or putting your home up for sale.
- Get decorating and do your own DIY. Blue walls, white ceilings and red carpet your thing? You’re free to experiment. With a rental landlord, you’ll usually need permission to paint or decorate. And renovations are out of the question.
- If house prices rise, you'll benefit when you sell. No-one can know what will happen in the future (hello 2020). But a glance at the Land Registry’s historic average property prices from the mid-1960s to early 2022 shows a general upward trend (broadly in line with economic growth). Hold on to your home for a number of years, and it should hopefully be worth more than when you bought it. However, plenty of bumps have sent prices tumbling – early 1990s and the 2008 recession, for example – so it’s never a given.
- Give your family a big money boost. Being able to hand down a home to your children or downsize later in life to release cash can give your family a huge financial head start in life.
…and some cons to consider too
- A big deposit can be daunting. Saving up at least 5% for a deposit (or more for a cheaper mortgage) can take discipline, time and plenty of tightening your belt. To help with the cost of buying a house, we’ve plenty of tips and guides, and don’t forget the costs of moving too.
- Your mortgage rate may rise. There’s no guarantee that interest rates won’t rise in the future. Your affordable fix today could become a much more expensive affair when your deal ends.
- Bust boiler? The repairs are on you. Bills for mending and replacing will now land on your floor (though at least you can decide on the quality and timing of repairs.)
- If house prices fall, it could hit you when you sell. Yes, another glance at the Land Registry’s historic average property prices shows the same trend pointing up. But house price tumbles can – and do – happen. In September 2007, the average price for all property types stood at £190,032. By February 2009, it was £155,417 – a near 20% fall. It didn’t recover to its Sep 2007 level until late summer 2014. And if prices fall to a point where your home is worth less than your mortgage, it could make selling difficult if you need to move.
The pros of continuing to rent…
- It’s easy to up sticks to go where life takes you. If your long-term plans are still not set – you’ve a new job in a different part of the country, say, want to work abroad or study overseas – a series of short leases could serve you well.
- In a relationship? Try living together first. Renting together can be a great test to see if you’re compatible. And if it all turns sadly sour, a split is usually easier than if you’d bought together.
- Spend less on moving in (in the short term at least). Your deposit can be four to six weeks’ rent, and you’ve the first month to pay too. But it’s a small sum compared to a mortgage deposit and the fees when buying a house. Once you’re in – and depending on where you live – renting can be a much cheaper expense than a monthly mortgage. While the gap between average rents and mortgages will vary, you won’t have any broker fees, loan costs or stamp duty to pay. (And if you can purposely pick a property with low rent, you could put what you save each month towards a deposit for a home.)
- Leaky roof? Call the landlord. You don’t have to worry if appliances begin to break or parts of the property need updating – it’s the owner’s job to fix it.
…and some cons to think about too
- Pet lovers have less choice of property. Our furry friends they may be, but their impact on rented properties – damage, mess, liability, smell, need for space – puts off many landlords.
- Is it an emergency? Not quite... Not every landlord (or their agent) will rush to repair a faulty fridge or find a plumber promptly. You could find it pays to brush up on DIY skills.
- Rent could rise. A property owner can look to raise your rent after each agreed term.
- The owner could always decide to sell. You have tenancy rights to avoid being left in the lurch but if the landlord unexpectedly wants to sell, you could find yourself having to find a new home.
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