Rent or Buy?
Many people in the UK perceive renting a home as a temporary solution with home ownership as the goal.
According to housing expert Natalie Elphickle, just 49 per cent of us will own our homes by 2041, which means that within 27 years, renting could be the norm. But how worried should we be, and is renting the best option?
To buy or not to buy?
A report by property website Zoopla revealed that after seven years, typical tenants in the capital would be £82,412 better off than someone buying an equivalent property with a 10 per cent deposit. The report claims it would take a buyer 18 years to become wealthier than the renter.
As a buyer, with a ‘repayment mortgage’ once you’ve paid off your bank, your home will be yours and you won’t have to worry about paying for somewhere to live. In addition to this if your home increases in value, you could use the equity (its market value less the mortgage debt) to help buy a bigger home or fund a comfortable retirement.
However, there can be cons to owning your own property. For starters it is a big commitment, you need to be sure you can afford what you’re taking on. When interest rates rise, your repayments will go up. It’s important you’re prepared for a rise. You also need to remember you have less flexibility than when renting. For example, selling up and moving is more expensive as you have estate agency and legal fees to pay.
Renters have no loans to worry about. You may have rent and bills to pay, but you can’t fall into negative equity and lose a property you’ve spent so much money on. You’re not affected by the housing market either – you don’t have to worry about interest rates suddenly rising or what you’ll do should the UK suffer another recession. In addition to this, if the idea of having to fix a boiler or re-carpet a hallway terrifies you, then renting is the better option, as these costs and responsibilities fall to the landlord.
Renting is more flexible than buying. If you don’t have any long-term plans or don’t know which area you would like to settle down in, when renting you’re free to relocate or move out at any time.
On the other hand, renting has its cons - Although you pay to live there your home is not yours and your landlord could decide to sell up at any time. If you have a fixed tenancy agreement you might have more time to prepare, but you’ll still have to go through the stress of finding somewhere new to live, fast.
Mortgages may not be cheap, but homeowners find comfort in the fact that their payments mean that one day they will own their property. With renting, your money is not being invested. Some people are okay with this, but if you’re not, you will be happier owning.