Buying or renting which is right for me?
86% of people in Britain want to own their own home, but for many renting makes more sense – particularly at certain points in their lives. Before you embark on homeownership, you have to decide which is the right option for you buying or renting.
Can I buy?
If you are one of the millions priced out of the market, and you can’t afford to buy somewhere (see Can I afford to buy a home?) then the decision is made for you – you have to rent. But even if you can afford to buy, you might still decide not to for perfectly good reasons
What are the advantages of buying your own home?
1. It gives you the ultimate freedom and security
- It’s your home, and no one can tell you otherwise
- You can decorate it and furnish it as you want
- You can call in the builders, and you will gain the benefits of the improvements (including the increased value of the property if you sell)
- You don’t have to deal with an unreasonable landlord who keeps pushing up rents, keeps reminding you they own the property, and bans pets
- You can’t be made to move out at short notice
- There is some evidence of the social and psychological benefits of homeownership. For example, according to the think tank Policy Exchange people who own their own home are significantly more satisfied with their home than those who rent – just 3% of owner occupiers surveyed were dissatisfied with their home compared to 16% of social renters.
2. It can save you money
- When interest rates are low, and if you have a big deposit, homeownership can prove cheaper than renting
- With fixed rate mortgages, you can control your costs more easily than being left at the whim of a landlord
3. It can make you money
- In a rising property market, you get the increase in property values. For many people, the most money they have made in their lives is from the rising value of their home
- You are investing rather than spending – instead of paying rent that pays off your landlord’s mortgage, your monthly payments will be contributing towards something that is yours
- If you live elsewhere for a while, you can make money renting it out
- Your home can be your life savings and pension plan all in one. At the end of your working life, you can downsize and live off the capital invested in your house
What are the disadvantages of buying your own home?
1. It is a huge financial commitment
- For most people buying a home is the biggest financial commitment they have in their lives
- Paying the monthly mortgage can be a burden, which you cannot easily escape from
- There are also huge costs to becoming a homeowner, not just buying the property, but the subsequent costs of insurance, maintenance and so on. See The Hidden Costs of Buying and Owning a Property
- If you are in a vulnerable position, buying a property can be ruinous. If you lose your job and don’t pay your mortgage, you could end up having your property repossessed, and lose your home
- If you think the property market is going to decline, and you are not prepared to sit out the downturn, then you could lose a lot of money
- If prices fall, you might end up with “negative equity”, where your home is worth less than your mortgage, making it very difficult to move house or sell without declaring bankruptcy
2. You have to do all your own repairs
- You can’t just phone up the landlord asking them to fix the boiler
- You’ll also have to shoulder all these costs, which can be massive. Redoing a leaky roof can cost tens of thousands of pounds
3. You cannot just give it all up and move elsewhere
- Many people, particularly before they feel like settling down, don’t want the commitment
- If you are not sure where you want to be in a year’s time, or if your employment situation is uncertain, then you shouldn’t consider buying
If you’ve read this and still believe that owning your own home could be right for you, see our step-by-step guide to buying your home.
- How much can I afford?
- Mortgages made simple
- First time buyer mortgages
- How the government can help you buy a home. An overview of schemes
- Top Tips – clever questions to ask the estate agent
- How do I find the perfect property?
- Top Tips – things not to forget when viewing a property
- The legal side of buying a home explained
- Buying a new build home – problems and top tips