Should I buy or rent?
On the face of it, it’s a simple question: what’s better, to rent a property or to buy one? But like many simple questions, the answer is far from straightforward and when it comes to property there are many factors to weigh up before deciding on your best way of paying for somewhere to live. Unlike many of our European neighbours, here in the UK we’ve developed a property owning mind-set over the past few decades, so what are the main benefits of buying a property?
Pros and cons of buying
On the plus side, once you’ve paid off the mortgage (assuming you don’t stump up the full amount in cash at the outset) the property’s all yours. Chances are that over time your investment in property will increase in value so you’ll build up some equity which you can use to buy a bigger home or help fund your retirement. Depending on the location of the property, the equity could be considerable, although there are no guarantees.
With your own property, you can make improvements internally and externally, and add to its value over time. You won’t have to answer to a landlord; you’ll have added stability, somewhere to put down roots and raise a family; you can have a pet. As a property owner, you’ll have greater access to other financial products, such as loans. You could also let out the property in future, generate an income, and start to build a property portfolio.
On the other hand for most of us, buying is a long term commitment so you need to be sure you can afford the mortgage repayments. Depending on the type of mortgage you have, you could face higher costs when/if rates go up. If the value of your home falls, you may end up in negative equity – owing more than the property is worth. The housing market can be volatile so you may not find it easy to sell when you want to.
Pros and cons of renting
According to some estimates, a lifetime renter will pay just under £300,000 to landlords in their lives, and even someone who is saving for a property while renting in the meantime will pay around £42,000 in the seven years it typically takes to raise a deposit. That said, renting can give you greater flexibility to move around as you’re not tied to a specific property. To some, renting conjures up images of being exploited by unscrupulous landlords in bedsit land, but that’s no longer representative of the modern rented market. Rented flats in city centres often come with added perks, including gym membership, concierges, and on-site parking. Renting a property usually means that while you’re responsible for the upkeep, renovations, repairs, and maintenance checks are the landlord’s responsibility.
Affordability
Getting on the property ladder can be especially hard for first time buyers although there are a number of Government schemes, including right-to-buy, help to buy, shared ownership, shared equity schemes, and more, so it’s definitely worth shopping around, or getting some expert help. With renting, on the other hand, you may only have to put down a month, six weeks or two month deposit on the house or flat before moving in, and can quit any time as long as you give the agreed length of notice beforehand.
