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.
Buying a house is a long-term investment and can work out cheaper than renting over the term of a mortgage, which is normally between 20 and 25 years. To buy a house, you will need:
6 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
At least 10% of the deposit amount set aside
To be able to commit to paying a monthly mortgage without any large debts outstanding
If you are renting, then you will already be paying a set amount each month to your landlord.
In early 2020 the average rent in the UK was £700 a month according to the Office for National Statistics (ONS).
The average price of a house in September 2020 was £261,795, according to the ONS. The average monthly mortgage payment was around £750.
But buying a house will involve other upfront expenses, not just the mortgage repayment.
If you feel you are able to commit to a monthly mortgage, then your next step is to find out what amount of mortgage you are able to borrow.
Next you can check to see if – based on current interest rates – you can afford the monthly mortgage payments.
Use this calculator on our mortgage comparison 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 a gift from a relative. A guarantor has to agree to cover any mortgage payments you miss, however their home as well as yours will be at risk if you do not keep up repayments.
It can be cheaper to own but there are other advantages to owning your own home.
Your monthly repayments will go towards buying your home, not into a landlord's pocket
You fully own your home at the end of the mortgage's term
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
Buying a home will initially be more expensive than renting; there are upfront costs like mortgage fees and stamp duty which you will need to budget for.
If you get a joint mortgage and separate, it can be complicated to sell the property
Interest rate rises can increase your monthly payments – although you can get a fixed rate to help you budget
You have to pay for repairs, including if something urgent goes wrong like a leak
Moving can take a long time because you have to sell your home first
If your finances become tighter, 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 your home being repossessed
There are still advantages to renting, if you have to move around for work then you can move home quickly when you need to.
Renting may also be a good idea because:
Finding and renting a home is usually quicker than the process of buying
You will not lose money if the property's price goes down
You won’t need to pay for repairs and renovations
It is often cheaper and rental payments rarely change, making it easier to budget
You may be able to rent a bigger home in a nicer area than you could afford to buy
One of the main disadvantages of renting is that you will be making large monthly payments to your landlord, not towards owning a home.
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
It is usually cheaper to rent in the short term because:
The rent you pay could be lower than what mortgage repayments would cost
The deposit you pay is usually much less than the initial costs of buying a home
However, mortgage repayments can sometimes come to less than paying rent, depending on the property you choose. Buying a home could cost less in the long term.
You can use this calculator to work out how many years it will take until buying works out cheaper than renting.
If you should rent or buy your home depends on your financial and personal circumstances. Ask yourself these questions to help make up your mind:
You need to save a deposit to get most mortgages, which is the amount you pay towards the purchase yourself.
It is shown as a percentage of the property's value, and you usually need at least 5%. This would come to £10,000 on a home worth £200,000.
You can get some mortgages that need no deposit, but you usually need a family member to agree to cover any payments you miss.
If you still cannot afford a deposit, here is how to save up for one.
Moving does involve some costs, and buying a home involves having to pay a conveyancer – or solicitor. This can be several thousand pounds; you may also have to pay Stamp Duty.
This is a tax you pay when you buy a home and is based on a percentage of the property’s sale price.
Find out how much you may need to save to cover the other costs of buying a home.
You can only buy a house if your income is enough to:
Afford your repayments while still leaving enough money for living expenses and everything else you spend money on
Make lenders agree you will be able to afford the mortgage
If you will only live in an area for a short period of time or you expect your circumstances to change, renting is usually cheaper and more flexible when you need to move home.
This is because the initial costs of buying a home are much higher than the deposit you pay when you start renting a home. These include mortgage fees, stamp duty, valuation fees and your solicitor's charges.
However, if you intend to live in an area or property for a long time, buying a house can work out cheaper.
Here are 7 ways to save up a mortgage deposit
If you will be living with a partner or someone else, you may be able to afford to borrow more if you buy a house. Here is how to get a joint mortgage and how they work.
Here’s your home-buying checklist:
If you're a first time buyer or looking to move house or remortgage, we can help you compare mortgages.
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.