Should I Rent or Buy? How to Make the Right Decision for You (and Your Money)

Should I Rent or BuyShould I rent or buy a home? Buying a home is arguably the biggest single purchase you will ever make in your life. So, you need to be mentally ready, as well as financially able, to apply for a mortgage.

However, buying a house is not right for many of us (money, transient life-style, house-sharing with mates etc.) and renting provides a better, more flexible option.

Home ownership is a national obsession in the UK. Our European friends in France, Germany and Italy are not so preoccupied with owning bricks and mortar – most Europeans rent rather than buy.

But in Britain, mortgages are big business and culturally, owning a house is the ultimate badge of success and security and it can actually be cheaper than renting.

If you’re currently in rented accommodation and are considering taking out a mortgage on a new place the first question you need to ask yourself is: Am I ready?

Buying a House: Should I Rent or Buy?

Before applying for a mortgage consider your current situation: are you settled and in regular employment? Or do you still feel like jacking everything in and travelling around the world?

Getting a mortgage is a big deal (and a big debt) and you need to be sure that you can make the repayments before giving notice on your rented pad.

Making your head spin? Well, read on, we’re here to help so you can answer the question: should I rent or buy? Here we tell you all the good and bad things about renting and buying so you can weigh up your options and make an informed decision.

Rent: Pros

1. Flexibility:

If you’re constantly changing jobs or you like to move around, then renting offers the flexibility to do that. If you rent, all you need to do is give notice on your property (usually three months), pack your stuff and move on.

2. You can live in a posh place:

Depending on your finances, renting allows you to live in desirable areas where you would otherwise not be able to buy because of high property prices.

3. You don’t have to fix the loo:

If something breaks in your rental property, your landlord is required to fix it. This takes the headache out of day-to-day property maintenance that homeowners’ experience.

Rent: Cons

1. No security:

Your property is owned by a landlord who, if they decide to sell up, can turf you out (with a legally required notice period). If you have kids, this can cause greater upheaval especially if they are settled in schools and have friends nearby.

2. It’s dead money:

Your rent gets paid to your landlord and isn’t going towards any sort of investment (such as paying off a mortgage towards owning your own place). So, renting offers no potential wealth creation.

3. Less cash in your pocket:

If you rent in London, your monthly payments will most likely be sky high. Depending on the type of mortgage you get, rental payments are generally higher than mortgage repayments. Plus, you don’t get any closer to actually owning the property.

4. It’s not yours:

In general, you can’t make changes to a rental property without the owner’s permission. So if you want an extra bathroom, paint the walls pink or put down a new carpet, you will have to ask the landlord first.

Buy: Pros

1. Your castle:

Owning a home can offer long-term security. Nobody can turf you out unless you fail to make the repayments on your mortgage.

2. Sound investment:

The more of your mortgage you pay off, the more of your house you will own.

Also, the value of your home can go up over time so if you decide to sell you could make a healthy profit – increasing your personal wealth, adding to your retirement pot and providing future security for your children.

3. Have fun:

Fancy orange walls with purple spots? Go ahead and splash it on.

If you own your home you can really make it yours by adding extensions, modern décor and a new kitchen and bathroom. OK, you must adhere to building and planning regulations, but you’re free to make it your own.

4. Cheaper than renting:

Again, this depends on the type of mortgage you apply for and the location of the property. However, more often than not, monthly mortgage payments come in under the average rent. Plus you own a stake in the house.

Buy: Cons

1. Big commitment:

Unless you’re buying outright, a mortgage is a huge debt. Remember: a mortgage is a loan and you must pay it back. If you are unable to afford the repayments, you will lose your home.

Also, if you are buying a house with someone else such as a husband or partner and you split up, dividing up the property can be complicated.

So you have to be sure about both your financial and personal situation before taking on this commitment.

2. You’re a slave to the market (and interest rates):

If you need to sell up then what you get for your house depends on the housing market.

During the financial crash of 2008, many people sold their homes for less than they paid for them and in some cases the mortgage owed was more than the value of the house – the dreaded negative equity.

3. The state of the national economy can determine how much you pay per month – if interest rates go up, so will your payments. So unless you are on a fixed rate mortgage deal, you’ll need to plan for a hike in interest rates.

4. Do It Yourself:

If the boiler goes phut or you need new carpets – it’s down to you. You need to find the money to do up your own home, replace things when they break and carry out maintenance.

If you are a dab hand at DIY then you can cut costs. But if you’re not practical you will need to pay someone to do these things for you, which can be costly year on year.

5. Selling costs:

If you factor in legal and estate agency fees, Energy Performance Certificates (EPCs) and removals firms, the cost of moving home comes to around £12,000.

This extra expense is something to consider if you are not looking for a home for life.

Phew, so it’s a big decision. Whatever you decide – just being able to keep a roof over your head is important in itself.

However, if you are thinking about changing your housing set-up, weigh up all the options carefully and make sure it’s the right time and place for you to do it.

Over to You

Have you recently bought a house or do you prefer to rent? Or are you desperate to get on the housing ladder? Share your experiences with us in the comments box below.

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One Comment

  1. Thank you for sharing these useful tips! I really needed this.

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