For many, the "rent vs. buy" debate is a familiar one. Renting offers flexibility and avoids the burden of homeownership, but it also means endlessly paying someone else's mortgage and makes it more difficult to save for your own deposit. Owning, on the other hand, promises stability, financial security, and the sweet satisfaction of calling a place your own. But, is it the right move for you?
What do you need to know about homeownership?
If you have been renting for the entirety of your adult life, you may not be familiar with some of the responsibilities and tasks involved with owning a home. The main things to make sure you account for are:
1) Paying the deposit upfront
For many, this is the biggest hurdle when it comes to buying your own house.
3) Extra fees
The process of becoming a homeowner involves several key fees. Make sure you have enough money left in the pot to cover the costs of surveys, solicitor fees, and potentially, Stamp Duty.
Insurances, such as life cover and building and contents, will also need to be considered.
4) Maintenance costs
When renting, you can rely on your landlord if you have any maintenance issues, such as if the boiler stops working. When you own your own home, if anything goes wrong, you need to make sure you can pay to get it fixed.
Benefits of owning
Building equity: Over time, your mortgage payments build equity in your home, unlike rent that simply lines your landlord's pockets. This equity can be accessed through remortgaging or selling, potentially boosting your long-term financial security.
An investment: Historically, house prices in the UK have continued to rise, especially since the housing crash in 2008. While there are fluctuations with house prices, housing is still generally seen as a good investment.
Peace of mind: No more fearing unexpected rent hikes or facing eviction notices. Owning your home gives you stability and control over your living environment. Decorate the walls with your favourite shade of teal, start growing fruits and vegetables in your garden, or install that dream kitchen – it's your choice!
Benefits of renting
Flexibility: Renting allows you to easily adjust your living space to suit your changing needs. Need a bigger flat for a growing family? Downsizing to a cosy studio? Renting offers more flexibility than owning.
Less upfront costs: No hefty deposit or mortgage required. Renting allows you to be more mobile and adaptable, especially if your career or life goals involve frequent moves.
Available schemes: There are some government-backed rent to own schemes available in the UK. One example is shared ownership, in which you own a portion of a property, and pay rent on the remaining share to a landlord. Then, you can buy further shares in the property, if you wish.
Decide what’s right for you
Before deciding whether buying or renting is right for you, there are a few things you should consider.
The first being affordability. Can you comfortably afford a mortgage and associated costs such as property tax, insurance, and maintenance? Be realistic about your budget and potential financial burdens.
Next thing to consider is whether you’re willing to commit to purchasing a property. After all, owning a home is, in most cases, a long-term commitment. Selling can be costly and time-consuming, so ensure you're ready to settle down before making the leap.
Finally, make sure you keep up with market conditions. House prices can fluctuate, and the UK market is no exception. Be prepared for potential dips in value, especially in the short term. If you’re struggling to keep up with market changes, this is something a mortgage adviser would be able to help you with.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.