Back in the pre-credit crunch days almost anyone could own a home. Credit was easy to come by and, although house prices were sky high, products like 100% loan to value mortgages meant there was no reason NOT to get on the property ladder. Of course all that has now changed. Since the economic crisis took hold lenders have tightened their criteria, slashing their LTVs and getting tough on things like interest-only loans.
As such some would-be buyers are forced to stay in the rental sector for longer than they had planned while they save up the mammoth-sized deposits now required when buying a house. Of course, the annoying thing is, renting is not exactly cheap these days. Indeed, it has been reported on several occasions since the crunch hit that renting is often MORE expensive than buying. A recent study by Barclays revealed owning your home rather than renting could save you almost £200,000 over 50 years.
Here we take a look at some of the costs involved with each.
Buying
Stamp duty – The cost of stamp duty varies. Properties between £125,000 and £250,000 are subject to 1% stamp duty. Properties between £250,000 and £500,000 pay 3%, above £500,000 4% and £1 million plus 5%.
Survey – You can expect to pay up to £1,000 for a survey, depending on the price of the property.
Legal costs - Legal costs vary but you would usually pay between £300 and £500 for a £200,000 property.
Lender’s arrangement fee - This is usually added to the mortgage and is normally between £500 and £1,000.
It’s also important to remember that as an owner you will be faced with some costs you’ve not had to deal with before. If repairs are needed in the property, for example, there’ll be no landlord to call up for assistance. You’ll have to fork out for them yourself.
Renting
When comparing costs of renting and buying it’s important to remember that many of the fees involved in buying a property are one off costs that are paid at the point of sale. According to the experts the real economic benefits come into play over the long term.
A study by Halifax found the average monthly costs associated with buying a three bedroom house in the UK stood at £608 in March 2011 – £98 lower than the average monthly rent paid on the same property type of £706.
What’s more, after paying out MORE each month to rent a property you’ll have very little to show for it in the future, except a happy landlord with a nice little investment.
So, are you saving for that deposit yet?
Scary. I live in the US and rent a studio for 450 a month (much cheaper than the average cost of apartments in the area 700-800 a month). I got lucky.
We will share a studio type apartment but there is a wood partition for privacy. These all information good for me because i want purchase this property.
I must say, live on renting could be more costly than buying the home. Buying the home is a much better option, I reckon. In the US, monthly rental for the 2 or 3 bedroom apartment is very high. Thanks for providing sufficient guidance.
In my opinion renting is easy and seems little inexpensive but for long time it is too expensive. So people should buy property instead of renting it.