Should you buy or rent a home?
From the dawn of civilization, we as human beings have associated security with having a roof or shelter over our heads. Many things have changed over the years, but one thing has remained the same, this is the idea of having a home for you and your family as the number one way of having security.
We all want a home where we can share our joy and sorrow with our friends and relatives.
We can talk about the emotional and psychological aspects of why having a home is important, but for now, let’s discuss the financial aspects of it and whether should you buy or rent a home.
There are advantages and disadvantages to both owning and renting a home. We will consider both the positives and negatives for you in this article, to help you make a clear and sound decision if you should buy or rent.
In This Article:
What are the advantages of buying a house?
There are quite a few factors that we can look at when choosing to buy or rent a home. This section will highlight some of the pros when looking at buying.
Freedom of ownership
The first thing about buying your own house is freedom. I am not saying there is no freedom in renting, but what I am talking about is the satisfaction you get simply from owning your home.
You do not have to worry about damaging the sink or getting any stains on the wall, because you do not have anyone to answer to.
You can invite guests to your home any time you want or have any type of pets you want. You do not need to worry about anyone’s permission or rules because it is your house and you can make your own rules.
You do not have to ask anyone if you want to change the colour of the paint in any specific room. You can decorate your house the way you like it. You can even reconstruct or modify your house.
Plus, any modifications you make to make the living experience better can even help increase the value of your house in the long run.
You can even rent part of your home to help generate cash flow, this is a big difference between buying and renting.
Cost-effective in the long run
When you think about buying a house, you might get frightened by the idea of the big upfront payment for the mortgage. But what you need to understand is you will be paying off the value of the house over some time.
You will not be paying rent, which is money you’ll never see again. Instead, you’ll be investing in an asset that you can get a return on.
After you have finished paying the mortgage off, you will become the permanent owner of your house. Unlike renting, where you are paying to live in a home and to use its utilities.
Whether we buy or rent, living with as little stress as possible is one of the keys to happiness in life. When you rent a home you will have to agree to certain terms with the landlord.
Depending on your agreement, the landlord can have the power to sell the property or renovate it in the future, forcing you to leave.
In those scenarios, you will have to leave your house within the given duration. But owning your own home gives you the right to decide whether to live there or not. No can remove you once you have completed the mortgage payment.
What are the disadvantages of buying a home?
Of course, there are also disadvantages of buying which could tilt the scales between buying or renting.
Down payment or upfront cost
To buy a house you will need a large sum of money and this is the deciding factor for most when considering whether to buy or rent. If you are deciding to take out a mortgage on your house, then you will also need to pay an upfront fee.
For example, if you are buying a house that is worth around £100,0000 you will need to pay about 20% of it upfront. The amount of the upfront charge varies depending on the lender you are taking the mortgage from.
Some banks even offer zero upfront charge mortgages, but they will have a higher mortgage interest rate.
Buying a home is like buying a car, but it is more expensive. You will need to maintain and take good care of your property. Certain maintenance responsibilities fall on your shoulders that you would not otherwise have as a renter.
For example, if the paint on the walls is peeling off, you will have to fix it. You can fix it yourself if you know how or you can hire a professional to do it for you. Hiring a professional will cost you more.
If the paint were peeling off from your rented home, you would just simply notify the landlord and they would have fixed it. But as you are the owner of your house you need to look after this sort of thing and maintain them on your own.
Before we talked about how to maintain and take care of a house, but another aspect of owning a house is you need to be responsible and committed to your agreements.
When you first move into your house, you will be signing a mortgage agreement. You will need to pay the mortgage payments for your home each month until your mortgage is fully paid off.
If you are deciding to sell your house, it can also be an expensive task. When selling real estate, you need to consider the current market.
For example, if you are looking to sell a property during an economic downturn, you will not get the same price as when selling a home when the economy is booming. The price of your home depends on the current market state.
Another problem may arise, for example, if you have a joint mortgage with you and your partner. You guys decided to separate; now you will have to decide what to do with the property you guys own jointly.
This could also be another problem. If you were renting a home together, you could have just moved out and found another place to live.
What are the advantages of renting?
On the other side of the buy or rent consideration is the pros and cons of renting.
Cheaper for the present
If you think about the short-term, renting is cheaper than buying a house. Renting a house requires you to put down just a safety deposit, which is much less than a mortgage down payment.
This safety deposit will be significantly less than the upfront fee or down payment you would have to pay for your own home.
Plus, you will only pay the safety deposit, whereas when buying your own house, there are other fees that you also need to pay.
When renting you will not need to pay any maintenance cost, because it is the job of your landlord to fix and maintain the home you live in. All you need to do is just let your landlord know about the issue that needs to be fixed.
If you are unable to afford a fixed deposit, then you should rent as it is cheaper for the near future. You can think about buying your own home later when your financial condition gets better.
The monthly mortgage payments you will pay could also be more expensive than renting. That is why renting is a better choice if you are in a tight situation financially.
Room for flexibility
Renting gives you the flexibility to move or change houses at your will. For example, if you are currently living in London and you need to move to Manchester because of your job.
You can just pack up, notify your landlord and move to a new city, and this is great freedom in the buy or rent consideration.
But if you had owned a home in London, then you would need to sell it. Selling a property takes time; you cannot just put it on the market and expect it to be bought immediately.
It takes time and effort to find the right buyer at the right price. You might even have to sell the property at a loss if the housing market is low.
This is how renting a home provides more flexible, especially if you are someone who does not like to live in a place permanently or you have a job that requires you to travel very frequently.
No need to worry
We talked about the peace of mind you have when you are the owner of your home. There is an advantage if you are renting, it is that you will not need to worry about the housing market.
You do not need to worry about the housing market, because it is not your property. Only your landlord needs to worry about the price of their property going down or up. You just need to focus on paying your rent on time.
What are the disadvantages of renting?
Paying to live
When you rent you are just paying to live there. You will not be benefitting from paying the rent, your landlord will benefit. You will not own the place you live, this is why between buying and renting, renting is more expensive in the long run.
In the case of owning your own home, you will be paying the monthly mortgage for you to get ownership of the home. After the mortgage is fully paid, you will become the permanent owner of your home.
Abiding by the landlord’s rules
There are rules for every tenant as set by the landlord. The severity of the rules depends on how lenient the landlord is. These rules can be reasonable or unreasonable depending on your point of view. But the bottom line is you will need to abide by the rules set by your landlord.
Should you buy or rent?
We have highlighted the main key points on whether you should buy or rent your home. Both buying and renting have their advantages and drawbacks.
At the end of the day, it comes down to your financial situation and willingness. Hope this guide answered your questions.
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Is it better to rent or buy a home in the UK?
The upfront cost of buying a home is much higher than if you are renting. This cost evens out after about 5 years of you living in the same place, so if you are planning to live somewhere 5 years or less then renting is probably the best option for you.
Only purchase a home if you feel committed to living there, think of it as an investment because the property will now be on of your assets.
Is renting a home a waste of money?
Renting is not a waste of money, although you may not be investing in a home as an asset for the future, you may be saving money on costly repairs, mortgage fees, and other purchasing costs that your landlord has to deal with.
If you aren’t financially ready to handle more than the rent plus renter’s insurance, then renting is the wisest choice for you.
Is it ok to never buy a house?
If you are someone who moves around a lot and isn’t looking to maintain a property to a high standard, then it’s ok for you to never buy a house.
Your property value will go up over the years, but to really regain the cost of buying and maintaining the home you’ll have to stay there for 5 or more years. Plus, if you don’t keep the property up properly then the selling value may be affected.