There are undeniable benefits to buying your own home, but getting on the property ladder can be hugely expensive, too. We weigh up the pros and cons of buying vs renting to help you decide with is better in the long run.
It’s almost accepted wisdom that buying is better than renting; after all, owning a home is considered one of life’s great achievements. However, renting offers flexibility and freedom that buying just can’t.
Deciding the right time to take the leap onto the property ladder hinges hugely on where you are in life and what you plan to do in the future, but there are plenty of other points you need to consider too.
We look at the arguments for- and against- to help you decide which is better for you:
Why buy?
1. The ‘stability’ factor
The most appealing aspect of buying a house is the idea of putting down your roots and taking ownership of a property that is yours to live in as you please. Buying a house means a measure of stability and security you wouldn’t be able to get if you were renting.
2. Investing rather than spending
The other big bonus when it comes to buying your own home is the idea that instead of paying rent every month to a landlord – money you will never see again – you are investing that money in your future.
In this way instead of paying rent you are building equity, so that at the end of the mortgage term you will be able to live rent and mortgage free (providing you're on a repayment mortgage, or have an investment to pay off the outstanding at the end of the term if you're on interest only, of course!).
3. Long-term cost-effective living
Buying a home rather than renting one can work out more cost-effective - providing you get the right mortgage deal - if you decide to put down roots in a certain area. Instead of paying rent towards something that will never be yours, you are paying a monthly amount towards owning your home outright in the future.
Plus, while renting over a long period means that the price of renting will rise with inflation, costing you more over time, your mortgage interest payments should reduce over time as the amount you owe decreases. As such if you intend to live somewhere long-term it may be cheaper to buy than to pay rent (admittedly there are lots of other factors to consider too; try a rent vs buying calculator to get more of an idea).
4. Living by your own rules
Buying a house provides you with a feeling of independence and privacy that renting is unlikely ever to allow you. When you have a house and a mortgage you’ll no longer be subjected to regular checks by a landlord to make sure everything is still in good condition, and you can live in your home exactly as you please – have as many pets as you want, paint the walls any colour, decorate with your favourite furnishings, and so on. You can live by your own rules, rather than the landlord’s or letting agents’.
5. Financial benefits
Financially, owning a house can provide you with useful benefits such as being able to take out secured loans if you need to, or simply being considered more stable by a potential lender. This gives you greater flexibility in terms of the financial products you may have access too. If you have a spare room in your house, you can even earn an extra income by renting that room out to a lodger.
Why rent?
1. Flexibility and freedom
If you only plan to stay in an area for a short period of time, or just aren't ready to settle down, renting is the most cost-effective thing to do. Renting comes with an element of flexibility and freedom that you lose as soon as you decide to buy.
When you buy a house you are making a significant commitment and if you need to up sticks and move elsewhere, it can take a long time to get the wheels in motion to sell the property or rent it out. You're also making a big financial commitment and have a lot more at stake if you can't keep up the repayments - after all, simply shifting to a smaller place while finances are tight just isn't an option.
2. No repairs and maintenance costs
While buying a house means you take over responsibility for the upkeep and maintenance for that property, renting leaves you refreshingly free of responsibility for repairs, renovations, maintenance checks and so on (and the associated cost!). Buildings insurance is also covered by the landlord and so you only have to worry about insuring your own possessions with contents insurance.
White goods for example can be extremely expensive to replace or repair, and if you are renting this is the landlord’s responsibility, not yours. Any wear to the building itself such as the roof or walls are covered by the landlord and you will never have to pay out for these while you are renting (unless the damage is caused by you).
3. Easy to budget
When you rent you pay out a fixed monthly amount with no interest and no additional fees. While your rent can go up over time at your landlord’s discretion, the fact that it is fixed means you can budget accordingly and know exactly what you will be spending month by month.
An unfixed monthly mortgage payment on the other hand can fluctuate depending on interest rates and may be more one month than the one before. Even if you are tied into a deal, if interest rates substantially increase after you lock into a fixed mortgage then you still face the risk of rate shock when your current deal ends.
4. Less initial expense
Renting a property often requires an initial deposit at the beginning of the renting term, perhaps 6 weeks to 2 months of rent up-front. While this can sometimes be a difficult lump sum payment to grapple with, it pales in comparison with the huge expense of buying a house.
As well as the initial deposit you would need to save up for buying a house, there are also mortgage set-up fees, solicitors’ fees, surveyors’ fees, and stamp duty to consider – as well as the large amount of interest you pay on such a significant loan. These simply don’t come into renting.
5. Less risk
Taking ownership of anything means you have something to lose – and the same applies to buying a property. If your finances take a turn for the worse and you struggle to keep up your mortgage payments, your home could be repossessed, although this is often a last resort. Securing a loan against your property introduces another element of risk because if you can’t keep up payments on that loan, you put your home in jeopardy.
What else should I consider?
The decision to buy a house is a big one and shouldn’t be taken lightly, but if you are at a stage in your life where you want to put down some roots, start investing in your future, and build a home for you and your family then - providing you can afford it and you can find the right property for the right price - buying a house is definitely worth considering.
On the other hand if you want to continue renting there’s no reason why you shouldn’t if it’s the right thing for you – it all depends on where you are in life and where you’re going.
