Deciding between buying and renting is not as easy as falling off a log. You would love to own your dream home, but it will require you to spend years in stashing away money for a deposit and then tying yourself with a mortgage that cannot be less than 10 or 15 years. If you rent a property, you will never own your house.
“Should I rent or should I buy?” is the most important questions people ask. Buying a house can significantly leave an impact on your finances, and hence you cannot take any decision hastily. Whether you should take out a mortgage or rent depends on your financial circumstances, credit score, age, plans and neighbourhood and various other factors. You should know the pros and cons of both a mortgage and renting a property.
Take advice from others
If you are deciding whether to buy or rent a house, you should take guidance from your acquaintance. They may suggest you better. They know much more than you about the benefits and drawbacks. It is crucial to stay abreast of them.
There were times when owning a house used to be a symbol of financial success, but this school of thought does no longer exist. The mortgage market has drastically changed in recent years, and if you do not carefully look over the hidden threats, it can be a heavy cross to bear down the road.
From some people’s point of view, home is a significant investment and anybody will be dullard if they do not invest in a home. There is no denying that it is worth investing in a property as it does not depreciate like any other asset. Hence, it adds up to your wealth. Still, you cannot ignore the fact that not everyone can get a foot on the property ladder successfully.
You should be financially ready if you want to buy a house
Buying a home is a better option than renting if you are financially strong enough to bear the cost of a mortgage. Putting down the whole value of a property outright seems like a dream for most of the people. If you take out a mortgage to buy a property, you will be paying interest on top of what you owe.
You need to make sure that you can manage to keep up with repayments. Further, you will need to pay down a deposit. Though you can get a mortgage by arranging a deposit of 5% of the value of the property, you should arrange at least 10% to get the best deal. Talk to your online mortgage broker in the UK. Depending on your repaying capacity and credit score, they can arrange a better deal for you that might not be possible by directly approaching a mortgage lender.
It is crucial to have an idea beforehand of how much money you can pay down outright as a deposit. Use online mortgage calculators and take guidance from mortgage advisors to know the total cost of the mortgage. Find out whether you will be able to afford it or not. Sometimes people invest in a property that is too expensive for them to afford. If you do it, you will fall behind repayments and end up losing your house and heavy penalties as a result. Make sure that you are financially ready to buy a home.
Rent a property if you do not want to be a homeowner
Even though you are financially strong, you may not want to own a house. It can be the case when your job requires too much travelling. In such a case, taking out a mortgage does not make any sense.
Apart from your financial situation, you will have to consider other factors while deciding between owning and renting a house. Renting is the best option when you are not confident that you will stay in the house for at least five or six years.
Many people become a landlord by renting their house with the hole that they will be able to manage both mortgages as rent will serve the additional cash inflows. It is a savvy move but cannot help in the short run.
Even if you find a tenant, you will be surprised to see that the rent does not cover their mortgage and other expenses. Some people do not face any problem with such a move because they are expert to predict the market move. You do not need to follow the crowd as your financial situation will not be alike.
Benefits and drawbacks of owning
- After paying off the whole of your mortgage, you will get the title. The value of your property will continue to go up.
- You can save your money on rent once the mortgage is settled.
- You can use equity to buy a large house.
- You can live your retired life comfortably as all funds will be yours. You do not have to spend on rent.
- You can refurbish you home as per your taste.
- You do not need to have a headache of contacting a landlord for small issues.
- No landlord could make you move just because they want to sell it.
- It can be an expensive deal because you have to pay additional fees.
- If the value of the home falls, you may not be able to sell it.
- You may fall into debt if your finances get tighter.
- Monthly repayments can go up if the base rate rises.
Pros and cons of renting
- You can move to another house when you want.
- Timely rent payments will improve your credit rating.
- You do not have to worry about home equity, property tax etc.
- Your landlord can increase the rent.
- You will have to move out when your landlord wants.
- Paying rent can be difficult after retirement.
Well, there is a hard and fast rule that can help you whether you should rent or own a house. Take into account your needs, future goals and financial capacity before you make the final decision.