Your home may be repossessed if you do not keep up repayments on your mortgage
Renting vs buying is a tricky question to answer. It really depends on your individual circumstances. We’ve highlighted some of the pros and cons of both, to try and help you make an informed choice about what’s best for you.
Once you pay off your repayment mortgage you own the property outright. It’s a valuable asset. The money you spend on your mortgage is buying this asset for you. You can use any equity you build up to afford a larger house or use the proceeds from your house to fund a more comfortable retirement if you choose to downsize.
If you want to make changes to your home, you can. As long as you follow planning regulations you can make changes to create your perfect place to live. And these alterations could add to the value of your home. If you’re renting you’re not normally allowed to make any significant changes.
It’s your home, so no landlord has a right to come and see how your property is looking. You have complete control over your own space and can choose to live in it however it suits you best.
If you make your mortgage repayments regularly you’ll be seen as a more stable person to loan money to, which could give you greater access to a wider range of financial products. You could also rent out a spare room (if you have one) and use this income to help pay your mortgage, subject to mortgage conditions. Remember there may also be tax implications of renting a room, depending on your circumstances.
It can seem difficult to save a large enough deposit to let you apply for a mortgage.
There are a number of costs that are involved in buying a property. Make sure you look at them all before you decide if you can afford to buy.
Make sure you know how interest rate changes will affect your repayments.
These can add up. If your boiler stops working, you’re responsible for getting it fixed or replaced. Unexpected leaks in the roof, gutter problems or even annual maintenance – they all cost you money.
Once you’ve bought a property you’re reliant on what the market is doing. If the value of your house doesn’t increase to match, for example, a rise in interest rates you could find yourself stuck where you are until the market improves.
If you’ve bought a property with someone else and you subsequently split up it will be far more expensive to sort out the property than if you were renting.
If you decide you want to move it’s a lot easier if you’re currently renting the property. Just give your period of notice and you’re free to start looking elsewhere.
These are all the responsibility of the landlord. So there should be no unexpected costs for you to bear.
When you’re renting a property you don’t have to worry about paying stamp duty, which you may have to pay when you’re purchasing a property.
Most landlords look for between one and two months of rent up-front as a deposit.
When you pay rent you don’t own any part of the property in return.
In the longer term, renting a property means there’s no asset you’ll own at the end of the commitment.
These can be a real pain if you get landed with any. If you own the property and sub-let to anyone (subject to your mortgage conditions) then it will be easier to choose a good flatmate.
Once you’ve looked at the pros and cons of each you’ll have a feel for which one suits you best. Look at the costs of both in the areas you’d like to live in. Make sure you choose the best solution for your circumstances. Home ownership isn't for everyone – so choose wisely.