In the quest for homeownership, renting has gained a reputation for being bad and not seen as a long-term option especially in the UK where rent prices are soaring. Renting is usually the biggest barrier for people to save up a deposit and while homeownership is great for some people, it isn’t a one size fits all solution.
With increases in average house prices outstripping wage increases, renting is a long-term reality for a significant portion of the population and we’ve evaluated the positives and benefits of both renting and buying so you can decide which option is best for you.
Buying a Home
What are the Advantages of Buying a home?
- No risk of having a landlord deciding to kick you out which gives you more security and peace of mind.
- Once you have completed all your mortgage payments you will own the house outright.
- If you choose the right property it can make a very good return on investment if it raises in value throughout your ownership.
- Interest rates are currently low which means that you can secure favourable mortgage terms which put you in a stronger financial position.
- You can decorate your home exactly the way that you like without having to get permission from anyone.
- Gives you the ability to be more prompt with organising any repairs or maintenance without having to wait for a landlord to action.
What are the Disadvantages of Buying a home?
- Be under no illusions that saving for a deposit is difficult and sacrifices will need to be made throughout the process. This is also caused by house prices consistent rises making them more expensive.
- Additional fees outside of the deposit include solicitor fees and stamp duty.
- You’re responsible for any repair and maintenance costs.
- If you decide to move property it can take months or years to sell a property so you can’t just decide to move instantly.
- Property values don’t always rise and if the value of your home falls below you’re the size of your mortgage then you will enter negative equity. This can make it difficult to sell or remortgage.
- Although interest rates are presently low this is not guaranteed forever and eventually, they’ll rise which will also cause your monthly repayments to increase.
Renting a Home
What are the Advantages of Renting a home?
- It’s easier and quicker to enter the rental market compared to purchasing a property that has many other miscellaneous costs such as surveys and solicitors’ fees.
- Rental properties often come fully furnished including white goods whilst buying a home you must incur these additional costs.
- Household maintenance is covered by the landlord which is especially handy when pricey things break such as your boiler.
- You aren’t tied down to paying a mortgage each month which are often at least 25 years long.
- Tenancies provide you with more flexibility and can even be as short as a month so you can move quickly if you need to.
- Notice periods can be as short as a calendar month giving you more flexibility which is great if you need to move to a different area at short notice.
- Moving into a rented property is a much faster process compared to buying a property and it’s not unusual for the process to be completed in as little as 5 days.
- As of 2019, it is against the law for landlords and lettings agents to charge admin fees to tenants.
- Renting can often give you access to a higher quality property that you otherwise wouldn’t be able to afford. This includes being able to live in nicer areas.
- You know exactly what your financial outlay will be each month whereas with a property you own, there can be considerably more unexpected costs that you’re financially responsible for.
What are the Disadvantages of Renting a home?
- The landlord or letting agent can decide to increase the rent once your initial rent period has been completed.
- It’s difficult to put your stamp on the property as you’ll need the landlords’ approval for any decorating changes you’d like to make.
- You need to rely on the landlord to maintain and repair the home. This can lead to waiting for weeks for them the organise.
- If your landlord decides to sell the property then you often have a short period to find a replacement property.
- It can be a struggle once your tenancy has been completed to get your full deposit returned.
So, should you rent or buy a home?
This isn’t a black or white answer and will be determined by your requirements. As you can see there are pros and cons of each although in areas where house prices are rising fast buying still usually is the best option.
Can You Save a Deposit?
Buying a home requires a deposit which can be a minimum of 5%. You’ll need to work out whether your current salary allows you to save up this deposit. If you’re not able to then you may need to stay renting.
Your Current Income
Irrespective of how much you think you can pay in mortgage payments each month, lenders follow very strict criteria when qualifying mortgage applicants. They will not only evaluate how much you earn but also your monthly outgoings such as existing direct debits, loans and everyday costs to understand how much you can afford to repay each month. Generally speaking the greater your income and lower your expenses are, the greater your affordability will be.
Length of Stay
It’s often recommended not to buy if you plan to live there for under 5 years because of all the additional costs that come with purchasing a property such as mortgage fees, survey moving costs etc.
If you plan to move in the short term, then it might be more suitable to rent instead. However, if you meet the requirements for a property and plan to live there for several years then it can make more sense to buy.