Rent vs buy. This is a tricky decision to make and one you don’t really want to get wrong. Buying a house can be expensive, and a more permanent move. Renting gives you flexibility if you move around a lot for work as an example. Today on the blog I’m going to weigh up the options of rent vs buy which may help you to decide which is the better option for you. Always remember that if you don’t keep up your mortgage repayments your home may be repossessed.
To buy a house
If you are going to look into buying yourself a house, you will need these:
- Around 10% of the house value set aside. A few mortgage lenders will accept a 5% deposit. You could look into schemes such as Help to Buy, Shared Ownership, and New Build Developer loans to help you get on the property ladder.
- Evidence of affordability – so the last 6 months of your bank statements, payslips and bills. If you are self-employed, you will need to provide more evidence than if you were employed. This is at least the last two years of accounts.
- You will need a good credit rating, as this will be checked.
- Your potential mortgage lender will also look to see if you have any large outstanding debts.
There is a great rent or buy calculator to guide you and see if it makes sense to rent or purchase a home. The basic calculator gives you an idea of how much a home you can buy while paying a monthly payment equivalent to your current rental payment. If you are looking into it more thoroughly there is also a more advanced tool that helps you with comparing the longer-term impact of inflation. Both are very helpful.
Advantages of buying a home
- You monthly repayments are paying towards you owning your own home. So eventually after the mortgage term you fully own it.
- You can make a profit if house prices rise.
- You don’t need permission to decorate and can have pets. (Some rental properties don’t allow pets).
- You can increase the value of your home by making changes such as extensions.
- You can feel fully safe and secure that a landlord won’t ask you to move.
Disadvantages of buying a home
- You are responsible for all repairs.
- If you have a joint mortgage and decide to split up it can get complicated.
- Interest rate rises can increase your monthly payments – although you can get a fixed rate to help you budget for this.
- There are consequences if you fall behind on repayments like repossession.
To rent a house
Like I mentioned previously renting is great for flexibility. Here are the advantages of renting a home for you and your family.
The advantages of renting a house
- You are not responsible for repairs and renovations.
- You are not tied to that area long term.
- It’s a quicker process to rent than to buy.
- If house prices drop you won’t lose money.
- It’s possible that you can rent a larger home than you could afford to buy.
The disadvantages of renting a house
- If you never get on the property ladder, you will have to pay rent for the rest of your life.
- The landlord could decide to increase the rent.
- The landlord could decide to sell, so you will have to move out.
- You might not get your rental deposit back if the landlord decides to keep it.
Rent vs buy? So is it cheaper to rent or buy a house?
Well, these are some statistics I’ve found. Between October 2019 and September 2020 the average monthly rent was £725 in England according to the Office of National Statistics (ONS). In September 2020 the average property in the UK valued at £244,513 as recorded by the ONS. Which meant the mortgage payment was around £800-£900. But of course, with buying a home you have to factor in other upfront costs and fees.
Renting or buying a home comes down to your personal and financial circumstances at the end of the day. There are a few questions you need to think about before your decide. They are:
- Do I have enough money for a deposit? If not how can I save money?
- Do I have enough money for the upfront moving costs besides the deposit? Upfront costs can be stamp duty, solicitor fees and surveys. You could ask if stamp duty could be included in the mortgage.
- Do I earn enough to afford a mortgage as well as living costs like bills and food?
- Will I stay in the house for a long time if I buy it?
- Will I be needing a joint mortgage?
Rent vs buy, whichever decision you make, I wish you lots of luck on your house journey.
Thanks for stopping by today.