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Should you rent or buy a property?

The decision to buy your own property is a big one, and there may be times when you’re torn between renting or buying. There are some situations where one is preferable to the other. But how do you decide?

Should you rent or buy a property?

If you’re a the position to buy, but don’t know whether you want to, have a look below at the advantages and the things to consider.

Why buy?

  • Buying a property is an investment – for many, they trust it more than investments or savings. In buying a home you are building up equity which can allow you to move up the ladder further on.
  • You have authority over your living space – unlike renting where they may be limitations on having guests, pets or making changes to the property, you can make a place you own into a home.
  • Increasing value – whilst it’s never a set outcome that property will go up in value, by investing in it and improving your property, you may find it is worth a lot more in the future, because of the changes you made. Similarly, if you buy in the right area at the right time, your property may increase in value naturally.
  • If you don’t like something about the property, you can change it.
  • In some cases, mortgage payments can be less per month than rent.
  • You don’t face paying renewal fees, dealing with landlord/agency checks, the possibility of having to move sooner than expected or rent going up.

Why rent?

  • Flexibility – if you don’t know if you like the area or the property, you can rent on a short tenancy agreement to try it out. If you find that the property has problems or the commute to work wasn’t as easy as expected, you can move.
  • Even if rents can be the same as, or more expensive than a mortgage, you won’t be dealing with the expense of owning a property, such as mortgage set up fees, conveyancing and surveying.
  • Whilst you may need to be able to pay a months’ rent in advance, there’s no check from the bank to make sure you’re eligible to rent. As long as you pay your rent on time, you don’t have to have lots of savings to rent, the way you would if you needed a mortgage.
  • Fixing and improving – if the boiler breaks or there are other issues with the property, it’s your landlord who has to deal with it (and pay for it), not you. That’s fewer responsibilities and lower costs!
  • Speed – moving on from one rental property to another isn’t particularly complicated. You end your tenancy and move on, rather than buying which can take longer than expected, and could fall through. If you want to move for a new job or opportunity, you can.
  • Not dependent on the property market – if the market dips and your rental property is worth less, it doesn’t make a difference to you. It’s not your investment, it’s just your home.

When is the right time to rent?

For most younger people, rent is an expected rite of passage, whether that’s at university, when moving out for independence or with a partner/friends.

Renting is advantageous if you’re looking for independence, moving to a new area with a new job or moving in with a group of people you don’t know that well.

It’s great for flexibility, and low initial costs – you don’t have to commit to a property or an area and if you don’t like it, you can move!

It goes without saying that buying is a big expense, possibly the biggest expense you’ll face. So renting is a better choice if you don’t have a deposit saved up or you may struggle to keep up with higher costs.
The great thing about renting is the speed and ease – whether you need to find a new property near a new job, or find a new place after a break up, organising rent and finding something in your price range is much easier than selling one property and buying another.

If you’re eager to live in different places and try new things in the next few years, then renting gives you the flexibility to do that.

If you’re a freelancer or do contract work that can be more varied month-to-month, it might be harder to get a mortgage, but won’t affect getting a rental agreement.

When is the right time to buy?

If you’re ready to put down roots and stay in one area for quite a few years, then you may be ready to think about buying.

Buying can be an expensive task, with not only the deposit and removals costs to think about, but solicitor fees, Stamp Duty, mortgage fees, surveys and lots of other costs. Buying and staying in one place for a while allows you to build equity in your home.

If you can afford to buy, know where you’d like to stay for a couple of years and want to build up equity in a home then it might be the right time for you.

Is it the right property for purchase?

It’s only the right time to buy if the property is the right one for you. This means getting a survey to ensure the property isn’t hiding any nasty secrets, and being thorough in asking questions and knowing what you want.

Have a look at our home viewing checklist if you’re not sure what you should be looking for on those property viewings, or what to ask the estate agent.

If you are willing to take on a ‘fixer upper’ you may be able to get a great deal (you can often find these types of properties at auction) but don’t underestimate the amount of work and the cost of renovations. If you don’t have any understanding or experience of building regulations and improving a house, make sure to ask someone who does, as you might be in for a shock!

What are your goals for the next few years?

Whether buying is right for you right now is really down to your goals. If you’re eager to set up home in one place, put down roots and have some consistency in your home life, then buying becomes a great choice. Similarly, if you’re planning on having a family, or you’re starting a job in one area, owning a property can be an advantage.

If you know you want to get on the property ladder, or want to be in a certain type of house later on then it may be that a small starter flat can help you get there more quickly. If you get a mortgage and build up equity, it could be easier to jump up the ladder later on, especially if your property increases in value.

If your goals are more fluid, and you’d rather travel and live in different places then buying a property may not be right for you. After all, if you buy a property with the intention to live in it, but decide to move elsewhere, selling can take a while and be costly. You may decide to rent out the property to someone else, but you would have to get permission from your mortgage lender and your mortgage rates may change, as you would become a landlord with a buy to let property.

What do you know about the area?

Buying in an area you don’t know can be risky, as the local activity can impact greatly on the value of your property. That’s why location is such a big factor in the value of a property.

If the area is unsafe, remote or difficult to get to, it may not increase in value, or may be difficult to sell later.

However, thinking long term with a property can be an advantage when it comes to location. If you buy in an area that is on the outskirts of a bigger, more expensive area, it may become an overflow location for those looking who can’t afford their ideal location.

Similarly, consider places where new infrastructure and travel connections may be implemented soon. Places can switch within a few years from a low cost area to one that people are desperate to live in.

Have a look at our guide what to consider when choosing your new neighbourhood.

What can you afford?

Whether you should buy or rent, really, comes down to cost overall. If you can’t afford to buy, you’re stuck with renting.

If you think you can afford to buy, you’ll need to work out an appropriate budget, allowing for buying costs like conveyancing, surveys and Stamp Duty. Even if you can afford the deposit, it’s worth making sure you are likely to be approved for a mortgage, and that you can handle the monthly repayments.

If buying a home is going to put you at risk of falling into debt, stretching your finances and causing stress, it may not be the best option for you. Similarly, choosing a slightly cheaper home rather than stretching your budget to the limit may make life easier for you.

How do you know if you can afford to buy? Check your credit report, ensure all debts and items on finance are paid off, make sure you have a deposit that is at least 10% of the value of the property (unless using a government scheme) and check whether you’d be approved for the mortgage using the 4.5 rule. This means you could borrow up to 4.5 times your annual income.

Use our Moving Cost Calculator to see how much moving might cost.
 
 
Deciding to buy or rent is a personal choice and depends on your circumstances, time of life, preferences and affordability. Whilst there is a push towards getting on the property ladder, there is no shame in renting if buying isn’t right for you yet. Buying a property with problems that you don’t feel strongly about may cause more problems down the line. If you’re excited about buying a home, always make sure it is checked thoroughly by a Chartered Surveyor, and that you’re getting the best deal you can.
 
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