So you’re ready to take the plunge and make those first steps into buying a house. You’ve saved up for months for the deposit, found a home, which you can afford, and everything’s coming together nicely. But not so fast! Even if you can buy, should you? Money Advice Service can give you an overview of the processes involved and the benefits and drawbacks to buying and renting, which include:
Benefits of renting
House prices continue to rise. So while you may have to find a month’s rent or two as a deposit for renting, compared to the equivalent for a mortgage it’s negligible. The buyer’s deposit will usually be at least 5 per cent of the total cost of the property but probably much higher. Throw in the costs of estate agent fees, removal, monthly bills, legal fees, Stamp Duty and more, and you’re looking at a lot of money. This article in The Guardian states that the average cost of a house is now above £186,000 – so buyers are looking at nearly £9,500 for a deposit alone.
If you rent you may face a rent rise of perhaps £10 a month every two or three years, but at least you can budget somewhat, and it tends to be more stable. However variable rate mortgages track the Bank of England interest rate; in 1992 this rose as high as 15%, and the equivalent today would be simply unaffordable for many homeowners.
Your dream job comes up in another city, or country, and you need to move pronto. If you’re renting it’s easy – a month’s notice and you’re out. But with buying it may take months or even years to sell – if at all. This article by YourMoney.com, using research from a report by Post Office Mortgages, showed that the average length of time to sell a house is eight weeks, without taking into account the hassle of buying a new home to move into.
Benefits of buying
There’s an incentive to pay your mortgage – at the end of it you own a house outright, and there are no more payments to make. You could downsize and enjoy a lump sum of thousands, or stay at home and enjoy extra hundreds or thousands of pounds in the bank per month. Even before you finish you can still move on, using the money you have put in so far. But there is no end to rent – your money only goes into a landlord’s pocket. Try working out if buying is viable for you using a mortgage calculator such as this one by the Money Advice Service.
On the whole homeowners can live by their own rules: no more house inspections from landlords, freedom to decorate and alter your home as you wish, keeping pets, renting out rooms…the list goes on. (Although it is worth noting that if you live in a block of flats you do have to adhere to some strict rules, particularly when it comes to the upkeep of communal areas). But if you rent you have to gain permission for all of the above.
Owning a house is an investment for your family. Psychologically it is healthy to know you have four walls which are yours, and could one day benefit your children. The renter does not have this luxury – they could be asked to leave at any time if the landlord decides they want to move back in. This article by shelter.org.uk details just a few rental nightmares tenants have faced, including unfair fees from letting agents.
There are additional benefits and drawbacks to both options, so weigh them up carefully before making your choice.
Categories: Real Estate
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