Buying vs renting – which is the best option for you?
Posted: Monday January 15, 2018
Many of the individuals we advise at Oriel are asking themselves the question; should I continue to rent property or should I buy my own home? Our society has put an emphasis on home ownership for some time, but there are many who prefer to live in rental properties and are perfectly happy doing so. Both of these housing methods have their own merit and each suits certain individuals more than others. Let’s delve into the details so that you can work out which is right for you.
Speed vs Saving
If you need to move to a new house quickly, renting a property has the advantage over buying one because buying a property requires saving for a deposit. The larger the deposit that you put down, the lower the monthly mortgage payments will be. However, there are some upfront costs associated with renting that you must consider. Typically, you are charged agency fees (anywhere between £75-£300), the deposit (usually the same as 1 month of rent), and the first month of rent, and these are all required in advance of moving in. So, although this amount is lower than a deposit required for a home (5% of the property value if you are using the Help to Buy scheme) there is still some saving to be done before you are able to sign the lease on your rental home.
Making an investment
Renting can sometimes be referred to as ‘dead money’, meaning that the money you are spending isn’t an investment, it is just going into your landlords’ pocket. Monthly rental fees have significantly increased over the past few years, and whilst house prices have also soared, the cost of mortgages has fallen.
This is why it is very important to look at all of the costs associated with renting vs buying. Don’t just assume you can’t afford to buy - it is always worth investigating exactly how much it would cost for you to own your own home vs renting a similar property.
Have a look at the property values in an area you would like to live in, and figure out a reasonable budget for homes that you would want to purchase. Then research the mortgages that are available to you with your deposit and use a mortgage calculator to work out your monthly cost. Remember, you could be eligible for the Help to Buy or Shared Ownership schemes, which would mean you would get financial assistance from the government to help you on your way. Compare this figure to the monthly cost to rent the same or a similar property.
Your monthly payments may actually end up being the same or even slightly less than your rent, with the added benefit of the money going towards paying off your mortgage and owning your home.
Spending your savings
Renting a property means that you can spend your savings on something other than a deposit for a house. You could go on a holiday of a lifetime, get a whole new wardrobe or perhaps buy your dream car. All of which are fantastic things to spend your money on. The difference between these things and investing in property, however, is that property generally maintains or increases in value, whereas the items listed depreciate or have no monetary value.
Complete control over the property
When you buy your property you have full autonomy over its appearance. You can paint it the colour you want it to be, furnish it with fitted wardrobes, shelves and other permanent fixtures that many landlords do not permit in a rental property.
Many renters do not invest their time and energy into their garden, as they do not know when they will be moving out of the property and thus do not want to waste their efforts. Why would you plant daffodil bulbs in October if you move out before they flower in Spring?
Stability vs flexibility
Finally, one of the benefits of renting a property is that you can hand in your notice and move out at any point (contract obliging). If you own your home, the process of selling is lengthier and more complex. However, the flexibility you gain from rental contracts could also leave you being given notice that you need to move out, and result in you having to find somewhere else to live and move out in a short space of time.