Should you rent or buy a home?

Deciding whether to rent or buy a home isn’t easy. This guide explores both options to help you make the right choice. 

Is it cheaper to rent or buy a house? 

In terms of monthly accommodation costs, renting is more expensive than buying a home. According to the HomeLet Rental Index, the average rent paid in the UK was £1,069 per calendar month in February 2022.  

On the other hand, the average mortgage is around £750 a month. That said, following the interest rates rise at the beginning of the year, the average mortgage bill is expected to climb. 

Of course, the calculation isn’t quite so simple. First, the amount of rent paid varies widely around the UK. In London, the average monthly rent was £1,757, whereas, in Northern Ireland, it was just £705 a month. 

In December 2021, the average UK house price was £274,712, according to HM Land Registry. If you purchased a house for that, putting down a small deposit – let’s say the minimum of 5% – then your average mortgage payment would be just over £1,000 a month. 

However, other expenses are involved in buying, including Stamp Duty, solicitor’s fees, and moving costs. Homeowners also need to pay to maintain and repair a property. 

If you are renting, you are not responsible for the maintenance and repair of your home, but you will still pay council tax and utility bills in many cases. 

Before choosing whether to buy a home, you need to weigh up all the costs involved. Renting also offers flexibility if you need to move because of your job or a change in circumstances. 

What renters pay 

Short-term renting is often cheaper and more flexible, but while you won’t have to pay for the general maintenance of the home, there are other expenses you can expect to pay. 

These include:  

• Council Tax - the cost depends on your local authority and the banding of your property  

• Energy bills - you usually have to pay the gas and electricity bills, but you do have the right to switch suppliers 

• Water - you may have to pay water rates, but unlike energy providers, you have to go with the local water supplier  

• Phone/broadband - while fewer people rely on a landline for calls, you will have to pay for your internet connection 

• TV licence - tenants are responsible for paying for their own TV licence  

• Contents insurance - your landlord will have buildings insurance, but you need contents insurance to protect your belongings 

• Service charges - these apply if you live in a home with communal areas 

Key differences between buying and renting

Whether you buy or rent your home will depend on your circumstances, but these are the main differences between owning and renting your home.

Considerations when deciding whether to rent or buy? 

The decision to buy a home versus renting one will be based on your circumstances. For example, renting may be a great short-term option if you are likely to move jobs soon or are still studying. 

Here’s our checklist to help you decide which is right for you. 

Do I have enough for a deposit? 

You can get a mortgage without a deposit – so-called 0% deposit mortgages or 100% mortgages are available. But these mortgages often come with pre-conditions. For example, you will need to have a very good credit rating or have a family member or friend willing to act as a guarantor and take on the responsibility of repaying the mortgage if you can’t.  

A more likely option is a 5% deposit mortgage or 95% loan-to-value mortgage. This means if you want to buy a house worth £200,000, you will need at least a £10,000 deposit.  

The bigger deposit you can save, the lower your mortgage interest will be - and you will have a greater choice of mortgage deals. (With a mortgage deposit of 20%, you really start to get attractive mortgages.) Here are some ideas on how to save up for a mortgage. 

Do I have enough to pay for the upfront cost of buying a home? 

Beyond the deposit, the main cost involved in buying a home is Stamp Duty. If you are a first-time buyer, you don’t have to pay stamp duty if the property you are buying is under £500,000. For anyone else, stamp duty begins on properties over £125,000.  

But Stamp Duty is one of several costs. There is also: 

• Valuation or survey fees - you will need to have a survey carried out of the property 

• Solicitors' fees - the fee you pay to make sure the sale of the property is legal  

• Moving fees - you may need to hire a removal firm to move your belongings 

• Estate agent fees - if you list your property with an estate agent, you may have to pay fees

• Mortgage fees -  these are charged by a lender if you take out a mortgage  

All these fees will vary, so you need to weigh up whether you can afford them. 

Find out how much you may need to save to cover the other costs of buying a home. 

Do I earn enough to afford a mortgage? 

It’s a very good idea to check if you can afford the monthly mortgage repayments based on current interest rates.  

Use this calculator on our mortgage comparison page to see how much each deal could cost you per month. 

If you have a deposit or guarantor, this will also help with your mortgage application.  

A deposit can come from your savings, or it can be a gift from a relative. A guarantor, meanwhile, has to agree to cover any mortgage payments you miss. However, their home and yours will be at risk if you do not keep up repayments, so make sure you go into this option with your eyes open. 

How long will I stay in my next home? 

If you will only live in an area for a short period or you expect your circumstances to change, renting is usually cheaper and more flexible. 

This is because the initial costs of buying a home are much higher than the deposit you pay when you start renting a home. However, if you intend to live in an area or property for a long time, buying a house can work out cheaper.  

Will I be living alone or with someone else? 

If you are living with a partner or someone else, you may be able to afford to borrow more if you buy a house together. Here is how to get a joint mortgage and how they work. 

You could buy a house with friends instead of renting. Here are the benefits and risks of buying a home with friends, and here is how joint mortgages work. 

Are there other ways of getting help to buy a home? 

Yes, you may be able to take advantage of a government scheme, such as the Right to Buy or Help to Buy schemes.