“Should I rent or should I buy?” is something a lot of people ask themselves. Buying a house or a flat is one of the biggest financial decisions you’ll make, so it’s important to get it right. This guide will help you decide if you should look into buying a house, or if you’re better off renting.
Mortgage vs rent?
It’s important to weigh up the pros and cons of buying a house as it’s a huge decision affecting you for a long time.
Benefits of owning
- Once you’ve paid off your mortgage, your home will be yours and you won’t have to worry about paying for somewhere to live.
- If your home increases in value, you could use the equity (its market value less the mortgage debt) to help buy a bigger home or fund a comfortable retirement.
- You can spend money improving your home and increasing its value without having to ask a landlord.
- Sometimes it can be cheaper to buy than rent.
Potential downsides of owning
- It’s a big commitment – you need to be sure you can afford what you’re taking on.
- When interest rates rise, your repayments will go up. It’s important you’re prepared for a rise.
- It might not always be easy to sell your home, depending on what’s happening in the market.
- You need to be sure you can afford maintenance costs like fixing a broken boiler or leaky roof.
- If you stretch your budget when you buy you might not have money for meals out, holidays and entertainment.
- if you’re living with someone and split up, deciding what to do with the property can be complicated and expensive.
- If the value of your home falls, you might be unable to sell if you owe more to your mortgage lender than your home is worth.
- You have less flexibility than when renting. For example, selling up and moving is more expensive as you have estate agency and legal fees to pay.
- If you’re buying a flat you might incur additional service charges which is not usually payable if you are renting.
Can you afford to buy?
The first step towards buying a property is working out whether you can afford it.
If you buy a home, you’ll have to pay for:
- deposit
- survey cost
- Stamp Duty
- removal costs
- legal costs such as solicitor’s fees
- your monthly bills – such as gas, electricity, home phone, etc.
If you can’t afford to buy
If you can’t afford the costs right now, think about Setting up a savings plan to help you reach your goal.
Government help to buy a home
If you’re on a low income, a first time buyer, a key worker, or only have small savings for a deposit, there are housing schemes available to help you buy your own home.
This article is provided by the Money Advice Service.
