For the average adult living in the UK, this will be an inevitable question: do you buy or do you rent? Well, depending on your financial circumstances and your long-term goals, each option has some pros and each has some cons. This article aims to offer some insight on the upsides and downsides of each in order to help you make a more informed decision. We’ll start with renting.
Renting is usually the first step that the average person will take when it comes to setting out independently, or with a new partner. Usually, in order to rent a property, all you’ll need is a couple of good references, proof of income (or, in some cases, a guarantor), and a deposit that equals the equivalent of about two-months’ worth of your rental. Depending on where you are renting, this could be anywhere from around £800 to £2000. But usually, if you’re renting in an area at the higher end of the cost scale, it’s likely that you will start out in a house share anyway. Not many people can afford £1000 per month in rental costs when they’re just starting out. So, as an average, let’s stick with a deposit of around £1000 and a monthly rental cost of around £500 plus bills. If you’re in a fulltime job or if you are moving in with a partner where your income matches a decent combined living wage, renting may be a good place to start. As the deposit and requirements are fairly manageable, it’s one of the fastest ways to find a home to live in. What’s more, if anything goes wrong with the rental property (with details depending on individual contracts and as long as and damage is not down to tenant neglect or carelessness), it is most likely the responsibility of the landlord to foot the bill and see to it that the issue is sorted and fixed.
The downside of a rental is that your monthly payment will, in most cases, be more than the sum you might be paying on a mortgage. What’s difficult about this is that every time you pay your rent, you’re putting your money into someone else’s pocket and making no investment. When you buy, the monthly mortgage payments are going towards your ownership of a property, which can increase in value and earn you some profit in the long term.
In simple terms, rentals are great when you’re not in a position to provide a buyer’s deposit. They are easier to attain, usually quicker to move into, and shouldn’t cost you unexpectedly if something were to occur; a boiler breaking or a leak for example. But be aware that rentals will have rules an restrictions with regard to freedoms you would otherwise have with a property of your own. For example, interior decorating, house modifications, and whether or not you are allowed pets, etc.
So let’s look into buying. As we’ve already said, buying will require more from you in the first instance than a rental. So, you will have to have the starting capital required to put down a deposit (which is usually 10% of the property selling price). There is also a longer and more detailed process to go through in terms of legalities, surveys and insurance requirements. This being said, if you have the means to buy, it is potentially the better option. Buying is essentially investing. Where with rentals, you are paying the landlord to ‘borrow’ their property as a tenant, when you buy a home of your own, your money is going towards an investment in a property which, if looked after, extended or converted, will likely increase in value over the years and offer some profit long-term. On a more trivial level, the house is yours to do with what you will: own pets, decorate in any way you like, modify or extend, and so on. You won’t have the added worry that you are going to accidentally damage something that will later cost you your rental bond. On the flip side of this, you will need to be cautious with your savings, as anything that may go wrong in the home, is solely your responsibility. Having said that, it is likely that your monthly mortgage payments will be lower than that of your rental price – so that extra cash can be put to one side for unexpected events.
On the whole, whether you buy or rent will be circumstantial. However, it is likely that rentals are the option when you are still finding your feet or you’re on a lower income and unable to put together a deposit. Buying a home may be a more complicated process, but for those who have the means to do so – they are an investment and offer more freedoms to live your life exactly as you choose.