Whether you should rent or buy is an old-age debate that feels particularly loaded at the moment.
Many people simply cannot afford to get on the property ladder and so do not have a choice between the two.
Despite a sizable increase in wages over the past two decades, housing prices have still managed to outpace any such growth. This has had an especially detrimental effect on millennials – home ownership for 25-34 year olds recently dropped from 55% to 34%, according to the Institute for Fiscal Studies.
And the situation is worse for those on their own. Rents are less affordable for single people than any time in ten years – accounting for 35% of their income.
Despite the ever-increasing cost of renting, saving for a deposit remains an issue for many tenants looking to get on the property ladder. With less disposable income available, taking that first step towards homeownership is becoming increasingly difficult.
For some people, buying a home might feel out of reach. You might want to read our guide for first-time buyers which outlines the steps and the government schemes you could use.
Advantages to renting a home
- A tenancy can be just six months and you can move after this time if it doesn’t work for you.
- Being able to give notice to vacate gives you flexibility to move to a different type of property or to a different area.
- Moving out of a rented home can often be quicker than selling a property, which is useful in case a relationship breaks down. Renting can also be a handy way to test a new relationship.
- You don’t have to worry about maintenance costs, meaning you are not responsible for the likes of a broken boiler.
- If you rent a furnished place, the furniture and white goods are thrown in too.
- Getting on the rental ladder is substantially easier, quicker and cheaper than buying a property.
- You don’t have to pay mortgage or legal fees and stamp duty.
- You don’t have to worry about house price movements.
Disadvantages to renting a home
- Big upfront costs to pay when you move house, which can include a deposit and your first month’s rent.
- Your landlord might decide to increase your monthly rent when your lease is up for renewal.
- No control over organising maintenance of your home so repairs can take longer than you would like.
- Could have to move if your landlord decides to sell the property, which means you suddenly have to uproot your life and find somewhere else to live.
- Renters sometimes find themselves battling with the landlord to get their full deposit back.
- You are paying rent to your landlord, unlike your monthly mortgage payment which goes towards owning your own home.
- You can’t redecorate without the approval of your landlord.
Advantages of owning a house
- In the long run you will have the security of a home without the risk of a landlord booting you out.
- You can decorate your home without asking permission from anyone.
- You have control over organising repair works which might be done quicker than if you were renting.
- Interest rates on mortgages are still historically low, though they have increased in recent months.
- Once you have paid off your mortgage, you will own an entire home.
- While you should think of it as a home rather than an investment, if property prices increase then you will benefit when it comes to selling it.
Disadvantages of owning a house
- Saving for a deposit is hard work and takes a long time, particularly as house prices are rising which makes it more expensive.
- You have to pay mortgage and legal fees and might have to fork out on stamp duty too.
- If repairs need doing, you have to foot the bill.
- Homeowners are subject to the housing market and price movements. If the value of your home drops below the mortgage you secured on it, yo will be in negative equity. Unless you have savings you can use to plug the difference between the value of your home and the mortgage, it will be tricky to remortgage or sell the property.
- Even if house prices don’t head south, the market can be sluggish. It can take months to sell a property so you can’t just move at a moment’s notice.
- Property is not as safe as houses. Historically, yes, costs of buying have gone up but this doesn’t mean that will continue.
- Interest rates are increasing, gradually pushing everyone’s mortgage payments up too.