November 28, 2022
The decision of whether to rent or buy is one that all of us are lucky enough to have the capital and a deposit ready. For many of us, owning a home is a dream that provides us with safety and security. Property has also proven to be a wise investment. But is it still today?
In this article, we explore the benefits of renting and buying. We briefly explain the differences and some of the challenges of renting and buying.
Renting v Buying
We all need somewhere to live, and so face the choice of buying or renting. What’s the difference?
When you rent a house, you pay a landlord a monthly amount to live somewhere. Of course, you don’t own the home, but you will have to pay all the bills in most cases.
When you buy a house, you secure a mortgage on the property. Once the mortgage term is over, you’ll own the home (if you had a repayment mortgage). You’ll need significant cash to manage the upfront costs, such as legal fees, and a secure income to manage the monthly repayments on your mortgage.
It’s not always that simple, with interest-only mortgages and leasehold properties something you’ll need to know about. For example, if you purchase a shared ownership property, you could pay both a mortgage and rent.
Benefits of Buying
In 2000, if you had bought an average home for £80,000, by 2019, it would have been worth £244,000, according to Land Registry figures. Today, that could be even higher. The lesson? Over time, the property is an investment that delivers consistent returns. So buying a property could be the best financial decision you ever make.
Currently, the UK is heading into a recession, which could cause house prices to fall by up to 10% over the next two years. It’s terrible news for those wanting to move, but it could lead to buyers picking up a bargain in the housing market.
When you buy a house, you’ll own it at the end of the mortgage term. That provides homeowners with incredible peace of mind. In addition, your home can act as an asset, which can be used to your advantage when you retire. You can downsize to unlock some of the capital from the property, or use equity release. This can help you to manage in your old age. When you die, you can also pass your property on to children or other family members.
We’ve focused a lot on the financial pluses, but some of the other benefits of buying include the following:
Freedom to decorate the property any way you please!
As long as you pay your mortgage on time, nobody can tell you to leave your home
The opportunity to invest in the property, build an extension, convert the loft etc.
You can use the home as the address of a business
Fixed mortgage payments enable you to plan out your finances
Mortgage repayments are often lower than renting, which can save you money
Over time, the work you do to improve a property will increase its value
Buying a home has many benefits, but the process isn’t always straightforward. The cost of purchasing a home is more than being able to meet the monthly mortgage payment. It can take several months and cost thousands of pounds to secure a mortgage, manage the searches, appoint a solicitor, and get to the all-important exchange.
At any point, your seller could change their mind (or if you’re in a chain, any of the buyers or sellers), which can jeopardise the whole process. When you buy, you’ll be living in the house for several years unless you can afford moving costs.
When you sell the property, you’ll have to pay fees all over again, including the exact moving costs when you find somewhere else to live. High prices such as these are one of the main disadvantages of buying.
Benefits of renting
Why rent when you can buy? That was a phrase many of us heard from our parents or grandparents. While it’s true, when you’re paying rent, you’re paying off someone else’s mortgage; it’s not all bad news.
One of the critical advantages of renting versus buying is the freedom to move when you want. You’re not tied to a home, or an area and can leave when your tenancy ends. Renting is ideal for individuals, couples, or groups with few ties to a place. If your career, love life or family takes you elsewhere, you’re free to go when your tenancy is over.
To secure a mortgage, you’ll need a sizeable deposit of at least 10% of the purchase price. It takes time to build this up, so you’ll need to rent a home (or live rent-free with parents or very forgiving friends). To rent a room, flat, or house, you’ll typically need a month’s rent. OK, so you’ll also have to cover some fees, but it’s likely to be several thousand pounds cheaper than buying a home.
Freedom to move, lower fees and expenses, and some of the pros of renting; here are some more:
If something breaks, springs a leak, or gets smashed, your landlord should pay to fix it
Some rooms, flats and homes come fully furnished, which means you won’t need to bring your own or buy new
Unhappy with your home or the area? Hand in your notice, and you can leave when your tenancy ends
You can rent a house in places where you may not be able to afford to buy
The moving process is simple, with no lawyers, handovers, and big bills
Of course, renting has some downsides – and it starts with money. Rents are rising across the UK, with landlords passing on the extra costs of interest rate rises directly to tenants in higher monthly payments. In many cases, renters pay more than mortgage payments for the same property. Is that fair? It’s not our position to say, but it is happening.
Renters have the freedom to move, but they have very little security. Your landlord can ask you to leave at any point during the tenancy, and as long as they do so legally, there is little you can do about it. While you may strike it lucky and get a great one, be aware that some landlords don’t follow the rules or maintain their properties in an excellent condition. Rent the wrong place, and it’ll be you that suffers. It’s one of the most significant disadvantages of renting.
Should you rent or buy?
For many of us, renting is part of the journey to buying a house. We rent properties when we’re younger, saving money over several years until we can cover a deposit to buy a home of our own. But, of course, some people choose to rent for their entire lives, and that’s totally fine. There are benefits to renting and buying; the decision is down to you, your circumstances, and your future plans.
Many people are put off buying a home because they’re worried about the process. At Simon Blyth, we help all homebuyers – from first-time buyers to those downsizing – find the right property at the right price. As well as Yorkshire’s most trusted estate agents, we can support you in securing finance with one of our brokers and manage the legal process with a solicitor. Get in touch today if you’re interested in making a move – we’re here to help.