Should I get a mortgage? Renting vs Buying

Deciding whether you should rent or buy a house is a big decision. One that will require lots of research and a deep dive into your finances and your current situation. Other factors such as house prices, mortgage rates and rental costs all need to be explored to. Let’s take a look at some of the pros and cons of buying or renting. Hopefully this will help you answer the question Should I get a mortgage? Renting vs Buying.

Pro’s to buying a house

Security of a place to live: Buying a house gives you peace of mind. Knowing that as long as you can afford to pay the mortgage you have the stability of your own home.

Future Investment: Buying your own home gives you an investment for the future. This could mean that you could sell your home and move into a larger home or even downsize in later years. This would allow you to use any equity from your property to help fund your retirement. Or you could just leave the property to your children.

Fixed Cost: If you are able to purchase a home and get a fixed rate mortgage then you are in control of the costs.

Freedom: When you buy a home you have the freedom to decorate or alter the property to make it yours. Even little things like being able to put up pictures can make a big difference.

Mortgage length: If you are looking at buying a house in your 20’s then chances are you will get a mortgage lasting 25 to 30 years. Whereas if you are in your 40’s your mortgage length will be shorter. This is all due to your age as mortgage lenders seem to only lend until you are 65 – 70.

Con’s to buying a house

Cost and finances requires: As well as saving up for the deposit which is normally 10%. You will also have to prove that you have the income to repay the mortgage. Other costs such as local searches and legal fees will also have to be paid to purchase your new home. The monthly repayment amount may be quite high and you will also have to factor in all the other bills that will come from owning a property. The repayment amount may also fluctuate due to interest rises. You will also need to be sure that you can meet the mortgage repayments in the event of accident, illness and job losses.

Unpredictable property market: Normally you would expect your property value to increase. If the property market was to crash then the value of your property may also reduce. This could put you in negative equity.

Less freedom: If you decide to move selling your home might take a while and is costly. No one knows what will happen in the future but if you do need to sell your home due to a change in job, separation or the need for a bigger home this could be a lengthy process. While some houses sell quickly some can take a while to sell. There is also the estate agent fees and solicitor fees to take into account for selling the property and then the moving costs themselves.

Other requirements: When you take out a mortgage you may have to also take out various other insurance policies. This is to ensure that your mortgage can be repaid. Owning your own home also means that you are responsible for all the repairs to the property. If your boiler breaks you need to make sure that you have the extra income to carry out the repairs.

Pro’s to renting a house

Location: Renting a house gives you the freedom to live in any area you choose. The is especially great if you are considering re locating to a new area you could rent before you buy. Relocating for a job is a good option for renting as the area might be unfamiliar. It also means that you can take out a short tenancy for 6 months incase anything changes.

No Maintenance costs: As you are renting all the repairs are the responsibility of the landlord. Any reasonable landlord will complete any repairs as soon as they are reported to them.

Cheaper outgoings: Rent is sometimes cheaper than mortgage repayments. You will also not need all the insurance policies that are requited for a mortgage. You will just need to make sure you can cover your utility bills and other outgoings.

Freedom to move: With renting you may only be tied into a 6 or 12 month rental agreement. This gives you the freedom to leave and relocate somewhere else.

Getting to know each other:If you are in a new relationship, renting a house with your new partner is a great way of getting to know each other. This is a good experiment before you commit to buying a home together.

Cost: Typically renting a house is cheaper than buying. This can be due to the fact that you will rent a house that is big enough for you to live in now. When buying a house you might be planning for the future. You might only be a couple but look at buying a 3/4 bed house to save moving again when you start a family. So the cost for you will be a lot higher to buy than rent

Con’s to renting a house

No security: At any time your landlord could ask you to move out. Your landlord can serve a section 21 notice giving you 2 months to leave the property.

Limitations: Renting a house means you have to abide by what is set out in the tenancy agreement. So there will be limits as to what your landlord will allow you to do and not do.

Rent increases: Your landlord is able to increase the rent if you are on a periodic tenancy without your agreement. If you are on a fixed term agreement then your landlord can only increase your rent with your agreement. Bear this in mind as to how it might affect your budget and outgoings.

Dead Money: Some people see renting as dead money as you are paying off your landlords mortgage rather than your own. Weigh up all the pro’s and con’s and decide if renting is the best option for you right now. This can either be for long or short term renting.

There is no right or wrong answer. Buying will be the best option for some people, whilst renting will be best for others. Before making a decision about renting or buying a house take a good look into all your finances. Speak to local estate agents about houses that are available to buy and rent. Speak to a mortgage adviser about what mortgages are available and the current interest rates. This will help you decide if buying a house is an affordable option.

If you enjoyed this blog Should I get a mortgage? Renting vs Buying, please take a look at some of my other blogs:

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