The pros and cons of renting versus buying

The pros and cons of renting versus buying

6th Jun, 2016

Most people in the UK rent at some stage in their lives, usually with the intention of getting onto the property ladder and buying their own home. Consequently, the private rented sector is staying strong. A report released last month by Clydesdale and Yorkshire Banks says that 64 per cent of people in the UK will rent prior to investing in their own home. There are a range of reasons why people go into rented property before buying their own place, a major one being the need to save up a deposit to secure a mortgage. 

Renting offers flexibility and freedom. It makes sense to rent if you are only intending to stay in an area for a limited period of time, for example with a job transfer on a short contract. Moving out of a house you own can be a lengthy, costly process, while as a tenant in a rented property you will only be required to give a pre-agreed notice period. There are no repairs or maintenance costs if you are a tenant, all of this will be down to the landlord to manage and pay for. Wear to the building itself, the roof or walls for instance, will be covered by the landlord too, as long as you’re not responsible for the damage.

Renting makes it easy to budget as you won’t have to worry about potential unexpected costs; instead you’ll pay a fixed rate of rent (it could go up if you extend your contract but you’ll be aware of this possibility when you take on the property) and you’ll be responsible for your bills, unless these are included in your payment to the landlord. To rent a property you will be required to pay a deposit which will be returned to you at the end of the tenancy, less any payments for damage incurred by you while you have lived there. 

The most appealing aspect of buying a house is: it’s yours. You own it, you can truly put roots down and live there as you choose. Moving from a rented property to your own house permits a huge sense of freedom. You will no longer be expected to meet rules laid out by the landlord. You can choose to have pets, paint the walls as you please, select your own fittings and furnishings. Assuming you can keep up your mortgage repayments, you’ll have greater security as a homeowner. As a tenant, you risk being told to leave if the owner decides to sell.

By paying a mortgage you are making an investment in your own future. You can build equity and at the end of the mortgage term you will be able to live mortgage free. With the right mortgage deal in place, buying a home can be vastly more effective than renting in the long term. Inflation will cause your rent to rise over time, whereas mortgage interest payments should reduce as you chip away at the total amount you owe. The practical financial benefits of house ownership include the ability to take out a secured loan. In general, you will be considered a ‘safe bet’ by a potential lender if you own your own property.

Currently, rental prices are rising and this is a factor leading people to rent for longer, as it slows the process of saving for a deposit. Landlords can help with this and it can be advantageous for both parties- tenancies have a tendency to rise more rapidly when someone is moving between properties. Extended contracts can be beneficial to tenants as price rise is likely to be more gradual and beneficial to landlords who don’t have the hassle of having to frequently find new tenants and the costs attached to this. A tenant who stays for longer means the property is not left empty between tenancies and creates a regular income over the long-term. This can be of real benefit when it comes to investing. 

 

Article source: www.rman.co.uk, www.money.co.uk

Image source: www.pixabay.com

View all posts by Amy Wray


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