The pros and cons of renting vs buying a home
Whether to buy or rent will depend on your financial circumstances, when it comes to your residential status. For the benefit of this blog let’s assume you could do both so the pros and cons can be more specific to differences and benefits.
Renting a property is generally regarded as a cheaper option than buying a home. That’s because the costs associated with buying are considerably higher, taking into account normally a rented property is supplied furnished for example.
However, mortgage payments are often cheaper than paying rent. This is still broadly the case but with the recent cost of living crisis and Bank of England’s rate rising to 3.5% to control inflation. New mortgage payments have been a lot higher and renting could be the way until the rates fall again.
The advantages of renting:
- Renting a property gives you more flexibility to move quickly
- Renting a property can be arranged quicker than buying a home
- Renting carries a lower financial risk than buying
- By renting, you won’t have to worry about maintenance or repairs
- By renting, you may be able to live in an area where you couldn’t afford to buy
- Renting allows you to use any money that would be tied into property for investments- making your money work for you.
- Renting rather than buying keeps your wealth more liquid, allowing you take advantage of the market changes quicker without disturbing your living situation.
The disadvantages of renting:
- By renting, you’re paying off your landlord’s mortgage rather than your own
- It’s harder to put down roots and settle in an area when you’re renting
- A rental property isn’t yours – so you can’t decorate or make major changes without Landlords consent
- Your rent could increase when your tenancy is due to renew
- You won’t benefit if the property grows in value over time
- You will have rent liability going into retirement, keeping your essential costs higher when they should be reducing.
- Less support when you fall on hard times especially vs a home that has been paid off
Buying a home
The advantages of buying:
- Buying a property means you have an investment for the future, and inheritance to pass on.
- You could benefit from capital growth in your home over the long term
- It’s your home – so you can decorate it and make changes that suit you
- You have the added security of owning your own home, with long term goal of paying of the mortgage completely therefore reducing your outgoing significantly.
- The mortgage you pay may be cheaper than rent
The disadvantages of buying:
- Buying a home comes with a lot of additional costs – Solicitor costs, stamp duty, mortgage fees, maintenance/decoration costs and furnishing costs for example.
- Owning a property can make things complicated in the event of a spousal break-up
- Interest rates can go up, which means you may end up paying more on your mortgage
- Selling a home can take time, which means it can be difficult to move quickly when you own your property
- Homeownership can be stressful and pressured due to the finances involved
- Home ownership with low deposits, could leave you with negative equity (Owing more on the mortgage than the value of the house) this could cause you become mortgage prisoner stopping you fixing your rate or moving lender.
So, is it better to rent or buy?
If you’re a first-time buyer, you may find it financially easier to rent rather than buy your own home. That’s because the additional costs with renting a property aren’t as high as buying you may be able to pass tenant financial checks more easily than mortgage lender checks. In general buying home in the UK is better than renting especially for long term financial security. Although having a home could be considered a liability in the short term, but long term heading towards retirement a mortgage free home is valuable. The share notion in knowing your hard earned money has gone towards something you can physically see does have its own allure. Allowing you to set your roots and giving you full autonomy to have pets or smoke inside for example. Buying allows you put your own unique stamp on your home in regards to decoration and even design which is important to making it feel like a home.
So, in the long term, you may be better off buying if you’re able to and if you’re not planning to move for a long time.
Written by: Manjinder Badyal
Date: 2 February 2023