When you enter the property market, you have two main options:
- Buy a property (usually by taking out a mortgage, but sometimes with cash)
- Rent a property.
Each route comes with its advantages and disadvantages.
Read on to learn more.
Advantages of renting
Flexibility
Renting gives you plenty of flexibility which you don’t get when you own a house.
It’s far easier to move into a new property if you don’t like your current one.
Less hassle
There’s also much less hassle involved with renting a property.
Maintenance of grounds, along with any communal areas, is not your responsibility.
And if something breaks, it’s the landlord who typically arranges for an expert to come out and fix it.
In short, you will have fewer tasks and less administration around these tasks.
Lower upfront costs
The up-front cost of renting a house is far lower.
While it tends to take more of your money in the long-term, you won’t need as large a deposit to put down.
And when you’re renting, you get your deposit back when you move out (via a deposit unlock scheme).
Disadvantages of renting
Long-term finances
Renting can have a negative impact on your finances long-term.
You aren’t building equity in the house. This means that all money you spend on rent is lost forever.
Low level of control
You also have less control over what you can do with property owners’ property.
Many landlords forbid keeping pets or playing music. And if you want to redecorate, you’ll need to get permission first.
Potential for unforeseen changes
Renting naturally comes with a degree of uncertainty.
For example, your landlord can increase it at any time. People have sometimes seen their rent double within a few years.
They might also decide not to renew your tenancy at the end of a term.
Advantages of buying a house
Long-term financial gain
Buying a house can be extremely financially beneficial in the long term.
Properties in the UK have an excellent track record of increasing in value year-on-year.
You’ll also build up equity in the house as you meet your mortgage repayments.
Over several years, your financial position will strengthen.
You have more control when you buy a house.
High level of control
You can decorate it however you like, as well as pay for extensions or remodelling.
You won’t have to navigate an unreasonable landlord who wants to approve everything you do.
Peace of mind
Many describe a feeling of stability, settlement, and pride in buying a home.
It’ll be the culmination of many years of hard work and saving. You can then build strong ties in the local community.
Financial commitment
However, one of the main drawbacks of home ownership is the enormous financial commitment. In many cases, almost all of your money will be tied up in one asset.
And saving up for a deposit is extremely expensive.
Maintenance responsibility and costs
You’re responsible for all maintenance and repairs involved with your home. You can’t rely on a landlord to do this for you.
These fixes come at an extra cost which you’ll have to pay for. The same applies to:
- Mowing your lawn
- Trimming hedges
- Fixing the roof
- Looking after your driveway…
And dozens more tasks.
Inflexibility
Lastly, owning a home doesn’t give you much flexibility. Mortgage companies often charge you an early cancellation fee if you change your plans.
And it’s expensive to move house, which means that you could lose money unless you’ve built up equity over several years.
When is renting a house better?
There’s no denying that renting a house has its uses. But most experts suggest that you only do it as a short-term solution.
Renting a house allows you to save up for a deposit to buy a house, if you don’t already have one.
You could need to live ‘below your means’ for a while, so your rate of saving is higher. Subletting a room is also worth considering.
Some parents rent a house when they’re trying to get their child into a high-ranking school.
Many schools don’t allow you to apply for a space unless you live there.
Renting can get this sorted on paper, while you then look for a longer-term arrangement.
Renting is useful if you’ve recently had credit issues, and you need to build up your credit score before being given a mortgage.
And renting is also great if your life is currently unpredictable.
Examples include if you suspect you’ll be relocated to a new work office, or if a loved one has fallen ill.
When is buying a house better?
Buying a house is better if you have the money to make a deposit.
This allows you to build up equity. Just make sure it’s a house you’d like to live in for a long-time.
It’s also preferable if you’re looking to give stability to your loved ones. A typical scenario is if you and a partner want to start a family.
Owning your house allows you to lay down roots and ensure your child has a consistent upbringing in a nice area.
If house prices in the location have consistently gone up in recent years, buying a house there could be a safe bet.
And it’s also worth considering if you can spot areas to increase the property’s value. This might be an extension, or remodelling.
How long does it take to save up a deposit for a house?
According to Hamptons International, it takes:
- A couple three and a half years to save for a deposit
- A single person takes roughly 13.5 years.
The sooner you can start saving up, the better. More young people are living with their parents for longer to do this.
And it could be worth living in a slightly less expensive rental accommodation, as this increases your savings rate.
Lots of experts recommend cutting out unnecessary costs. Subletting a room could be worth considering.
And plenty of other professionals suggest teaming up with someone else, as this increases the amount you can borrow.
Schemes to help me buy a house
If your long-term goal is to buy a house, plenty of government initiatives aim to make this achievable.
First Homes
First homes is an initiative that gives local first-time buyers a discount on new build properties.
This is usually between 30% to 50% of the total value. This discount remains when you sell the house further down the line, though.
Shared ownership
Shared ownership is a great option.
This involves buying a percentage of the house and making rent payments on the remainder.
You can then ‘staircase’ your ownership of the property, meaning you buy more as time passes.
Rent to buy
Rent to buy is a third common option.
It allows you to buy a home at 20% below the usual market rate.
Your initial tenancy agreement will be for up to 2 years, during which you should save up for your deposit on the discounted house.
After that, if you need more time to save up for your deposit, your landlord may agree to extend your tenancy.
Contact your local council to find out about more ways to help you buy a house.