Your home is your castle, but does it make a difference if you own it or rent it?
Read this guide and find out whether buying will save you money and exactly what responsibilities take on when you climb on the property ladder.
With mortgage rates low and rents high, Halifax reckons it is now 16% cheaper to buy than rent a home.
It has calculated that a three bedroom house costs £621 a month to own, compared with £741 a month to rent. Over a year, that means owning is £1,440 cheaper, and that includes household maintenance and insurance costs.
Of course, the specific calculation for you of renting vs buying will depend on a number of things, including: rents and house prices in your area; the mortgage rate you qualify for and the property you want to live in. But, there are a few simple steps you can take to get an idea:
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If you need to move around for work, or you want the flexibility of being able to drop everything if offered the adventure of a lifetime, renting is usually the best option.
Tenants can leave their homes within a few weeks or months and never worry about it again, unlike homeowners who must go through the lengthy and expensive process of selling, or they must let their homes.
However, owning a home can provide greater peace of mind. You don’t have to worry about your landlord suddenly selling up and booting you out, which can happen with very little notice. As long as you pay your mortgage every month, that house is yours.
And when you own your home, your biggest monthly payment is paying off something that will eventually belong entirely to you and that can be passed onto your children.
No one really knows what’s going to happen to house prices or rents in the future. If everyone had known the global financial crisis was about to hit, sending house prices plummeting, no one would have bought at the peak of the market in 2007. Of course most people didn’t know, and many ended up in negative equity – where their mortgage is for more than their house is worth.
While you shouldn’t gamble anything on house price predictions, you should know what’s going on in your local market. There is a wealth of information online that allows you to research house prices in your area. The House Prices Indexes at Nationwide and Lloyds are a useful indication.
The LSL Buy to Let Index is a useful tool for both landlords and tenants to see if rents are going up or down, and offers predictions for the future.
Do you have savings worth at least 10% of the property value?
Have you enough cash to cover stamp duty, legal fees, furniture and repairs?
Are you happy to settle down in a house for at least several years?
Are you happy to decorate, repair and renovate?
Do you want the security of having a home or the future?