Getting on the property ladder is a dream most people hold. They want to have a place to call their own, and that’s entirely understandable.
However, renting has its advantages, too.
Weigh up the upsides and disadvantages of both renting and being a homeowner before you take the plunge to buy your first home.
What are the benefits and disadvantages of renting?
From saving on bills to flexibility of moving when you want to, there are several reasons to continue renting for a while.
Benefit: Flexibility
If you change jobs, your family grows or you simply want a new place to live, moving rented accommodation is simple.
Owning your home ties you to the location and the property, as the expenses involved in buying a different property can quickly run into the thousands. When you rent, the only cost you need is for a deposit and first month’s rent.
Benefit: No extra costs
If your boiler breaks down or your roof starts to leak, it’s your landlord’s responsibility to fix it. You don’t have to worry about covering the costs of a leasehold property or having to pay capital gains tax when you leave the property.
Disadvantage: Lack of security
Most tenancies have a clause after six months that your landlord can give you two months’ notice to leave the property at any time. This lack of security can cause significant distress.
Your landlord may decide not to renew your annual tenancy, too, leaving you with a short space of time to find a new place to live – and raise the related costs to move.
Disadvantage: Stringent tenancy agreements
Tenancy agreements can have lots of hidden clauses that restrict what you can and can’t do while you live in the property.
You may not be allowed to keep any pets, for example, or you might be required to have the carpets professionally cleaned every six months. You also might not be able to decorate it how you’d like to, meaning you may be stuck with décor that doesn’t suit your personal taste.
When you own your home, you can do what you like, without a landlord imposing such restrictions on you.
What are the pros and cons of being a homeowner?
Owning your home is fantastic – but you first need to factor in the downsides and costs of being a homeowner to make sure you can afford it.
Con: Mortgage repayments can increase
Mortgage repayments can go up or down as interest rates change. You can avoid this by finding a fixed-term deal, and remortgaging after the deal ends. But that also costs money.
You need to make sure you can afford an uplift in your regular monthly mortgage repayments, otherwise, you could fall into debt. There’s even a risk that your home could be repossessed if you don’t meet your repayments.
Con: You're responsible for repairs and maintenance
Unexpected repairs, such as broken boilers or cracked and frozen pipes can turn into costly ventures. It’s ideal to have a savings ‘buffer’ to be prepared for such events.
Con: Lack of flexibility
Whether your family grows and you need more space, or you get a new job and need to relocate, moving is less simple and more expensive when you own your home.
Pro: Invest your capital
Your money goes towards paying off your own property, not a landlord’s mortgage. The payments you make every month give you something tangible in return, compared to the ‘empty’ money you spend on rent.
Pro: Improved financial standing
Being a homeowner can improve your credit score and provide added security, as long as you keep up on your mortgage repayments.
More than that, you own the asset that you’ve invested in. Once you own 100% of the house, you can live free of regular monthly payments with no more rent or mortgage instalments to pay. That frees up significant capital for you to invest in other ways.
Pro: Own your space
You don’t have to worry about whether you’re going to get your rental deposit back, nor do you have to put up with home inspections from your landlord.
You can decorate your home how you like and implement the house rules that suit you – not anyone else. The freedom of owning your own house is what draws most people to get on the property ladder.
Find out more about our Mortgage Advice service in Hull