Should you rent or buy a home?

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With average house prices and rents both rising, choosing between buying and renting can be a challenge. Renting can offer flexibility but often costs more, while buying your own home is a long-term commitment. Find out which is the best, most affordable option for you.

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

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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. 

Advantages of buying a home 

There are several advantages to owning your property. One of the main ones is that your property value is likely to go up over the long term. 

This means when you pay off your mortgage, you may have the option to sell and downsize when you retire. 

The main advantages to buying a house include:

  • Your monthly repayments all go towards buying your home, not into a landlord's pocket 

  • You fully own your home at the end of the mortgage's term - typically 25 years 

  • You could make a profit if house prices rise 

  • You don’t need anyone’s permission to have pets or redecorate 

  • Any maintenance or changes you make to your house could increase its value 

  • You can’t be forced to move by a landlord  

  • You have an asset that can be passed on when you die

Disadvantages of buying a home 

Buying a home will initially be more expensive than renting. There are upfront costs, like mortgage fees and Stamp Duty, that you need to budget for. What’s more: 

  • If you get a joint mortgage and separate, it can be complicated to sell the property or take over the mortgage

  • Interest rate rises can increase your monthly payments – although you can get a fixed-rate mortgage to help you budget  

  • You have to pay for repairs, including urgent problems like leaks 

  • The moving process can take a long time, particularly if you’re in a lengthy property chain 

  • If your finances become tight, moving to a cheaper property can take some time 

  • There are financial consequences if you fall behind on repayments, like getting into debt 

  • If you fall too far behind on your mortgage, you could face bankruptcy or have your home repossessed 

Advantages of renting a home

Although buying a home has many advantages, renting comes with its own benefits. These include: 

  • Flexibility: if you need to move around for work, you can quickly relocate 

  • Finding and renting a home is usually quicker than buying 

  • You won’t lose money if the property's price goes down 

  • You won’t need to pay for repairs and renovations 

  • You’ll need a smaller deposit and rental payments rarely change, making it easier to budget 

  • You might be able to afford to live in a bigger home and nicer area than you could if you were buying 

Disadvantages of renting a home 

One of the main disadvantages of renting is that you will be making large monthly payments to your landlord rather than towards owning your own home. 

  • If you rent, then you face the prospect of paying rent your whole life 

  • It’s becoming more expensive to rent: the cost has increased by 8.6% in the past year 

  • You won’t benefit from any increases in property values

  • You can’t sell up and downsize later in life 

  • If you never buy a house, you have to pay rent for your whole life - even after you retire 

  • If your landlord decides to sell or get new tenants, you have to move out 

  • Your landlord can set rules and restrict changes you can make to the property 

  • You have to pay a deposit, and the landlord may keep some or all of it 

  • Your landlord could decide to increase your rent 

  • Improving the property could increase its price, but this only benefits the landlord

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.

Property value 

The average home is worth over £270,000. If you own your home, you can choose to sell it and use the increased value - or equity - to either buy a bigger property or downsize and invest or spend the money you have made. 

For example: 

You buy a property worth £250,000 with a deposit of £50,000 and a mortgage of £200,000 

After 25 years, assuming house prices grow, the property could be worth £650,000. 

After interest on the mortgage and maintenance costs, you will have made a profit of at least £200,000.   

Tax Benefit 

Homeowners have to pay taxes such as Stamp Duty, and in some cases, Capital Gains Tax and Inheritance Tax. Renters avoid these charges.

Stamp Duty is due if you pay more than £125,000 for the property, although first-time buyers are exempt if the property costs less than £500,000. 

Capital Gains Tax may be due when you sell your house if you have let part of it out or used part of it for business only. You may also owe CGT if the grounds, including buildings, cover more than 5,000 square metres (just over an acre).

Repairs and Maintenance

Homeowners have to pay taxes such as Stamp Duty, and in some cases, Capital Gains Tax and Inheritance Tax. Renters avoid these charges.

Stamp Duty is due if you pay more than £125,000 for the property, although first-time buyers are exempt if the property costs less than £500,000. 

Capital Gains Tax may be due when you sell your house if you have let part of it out or used part of it for business only. You may also owe CGT if the grounds, including buildings, cover more than 5,000 square metres (just over an acre).

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.

Should I rent or buy FAQs

Is buying a house worth it?

Buying a house is expensive in the short term and involves more than just a monthly mortgage payment. You will need to be able to afford legal fees and moving costs, and once you own the property, you will be paying for maintenance and upkeep. However, if the price of the property rises, you could end up benefiting, unlike renting, where you will never own the property. 

Is renting a waste of money?

Renting isn’t a waste of money if you can’t afford to or are not in a position to buy a house. Purchasing a property and then not being able to keep up the mortgage repayments could end up costing you more if the house is repossessed, which can put a black mark on your credit rating for years afterwards.

Is owning a home a good investment?

Financial advisers recommend considering your home as an asset - one that can save you money, rather than being an investment that makes money. For example, one reason many people choose to buy their home is so that they don’t end up paying rent in later life. Owning your own home can mean you have an asset that can be used to help fund your retirement. You can also sell it, downsize and invest any money you may make. 

Unless you are a professional landlord, any property you own and live in is an asset, not an investment. The most important consideration is whether you can afford to pay your mortgage.

What do I need if I want to buy a house?

Buying a property is a long-term investment, but it can often work out cheaper than renting for 20 to 25 years, the normal length of a mortgage term.  

To buy a house, you normally will need: 

  • At least a 5% to 10% deposit  

  • Six months’ worth of expenses, including bills and mortgage payments set aside in a savings account 

  • A good credit rating to get access to the best mortgage deals 

  • To be able to commit to paying a monthly mortgage without any large debts outstanding

How much can I borrow on a mortgage?

If you feel you can commit to a mortgage, your next step is to find out how much you can borrow. It’s best to use a mortgage affordability calculator to help you work this out.  

Find out how much mortgage you could borrow 

Work out how many years it will take until buying works out cheaper than renting. 

If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.

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