Although home ownership is a lifelong aspiration for many in the UK, rising living costs and rent increases have made this goal less attainable than ever.
According to the Institute for Fiscal Studies, the percentage of 25- to 34-year-olds who own homes has dropped significantly from 55% in 1997 to around 34% today.
Meanwhile, average monthly rents have spiked – reaching £1,231 outside of London and £2,567 in the capital (increases of 9.3% and 13.7% respectively). (1)
This has resulted in a tough market for those looking to buy property, especially first-time buyers.
If, however, you find yourself in a position to be weighing up the pros and cons of renting versus buying, this guide will walk you through the advantages and disadvantages of each – so you can make a more informed decision.
Advantages of Buying a Home
- Ownership at the End of the Term: The most obvious benefit of buying your home is that once your mortgage is paid off, the property is entirely yours – giving you long-term security and equity.
- Potential for Property Value Growth: One of the most desirable things about real estate is that it typically appreciates over time, meaning you could profit when selling your home if the market performs well.
- Freedom to Decorate: When you own your home, you can design and decorate it to your liking, without having to adhere to a landlord’s rules. For many people, the freedom to make adjustments is one of the best things about owning their own home.
- Pet Ownership: If you’re a lover of our furry animal friends, as a homeowner, you’ll have the freedom to own pets without the worry of landlord restrictions.
- Payment Stability: Unlike renting, where rent can rise unexpectedly, you have greater control over your mortgage payments (barring changes in variable rates rates). To discuss fixed-rates with an advisor, visit our contact page now.
Disadvantages of Buying a Home
- Reduced Flexibility: If you’re not ready to settle down in one spot, moving house becomes more complex, as you’ll need to sell your property before relocating. The process also includes stamp duty costs.
- Deposit Challenges: Lenders generally require a deposit of at least 10%, which can be difficult to save up, especially given rising property prices. Often first-time buyers put their life savings into a deposit, which means it can no longer be used for other things.
- Responsibility for Repairs: Homeownership means you’re responsible for repairs and maintenance, whether it’s a faulty boiler or a leaky roof, and these costs can add up quickly.
- Risk of Repossession: Failing to keep up with mortgage payments could result in the bank repossessing your home. This might affect your credit history and have negative repercussions when applying for future loans.
- Interest Rate Fluctuations: If you fall on the SVR, changing interest rates mean your mortgage payments could rise unexpectedly, adding uncertainty to your monthly budgeting.
Advantages of Renting
- Landlord Handles Repairs: As a tenant, you don’t have to worry about costly repairs like replacing a boiler – your landlord takes care of it for you. If cash flow is a struggle, this can be a big weight off your mind.
- Greater Flexibility: Renting gives you the flexibility to move easily if your job changes, your relationship ends or your needs suddenly evolve. If you’re not ready to settle down, renting offers more freedom to change your circumstances.
- Easier to Budget: Although they can be raised, rents are typically fixed for the length of your lease – which makes monthly budgeting simpler, especially if the cost of bills is built into the rent.
- Access to Better Locations: Renting can allow you to live in more desirable neighbourhoods that you may not be able to afford to buy in. For example, renting is more common in London due the increased access to high-paying jobs and leisure facilities.
- No Legal Fees: Home buying comes with hefty legal fees often amounting to thousands of pounds for solicitors and paperwork, which you avoid as a renter.
Disadvantages of Renting
- No Equity: While homeowners gradually own more of their property with each mortgage payment, rent payments go directly into the landlord’s pocket without contributing toward ownership. When you move out of a rented property, you won’t have anything to show for the expenditures you’ve made.
- Rent Hikes and Evictions: Landlords can raise your rent when your lease is up or end your lease unexpectedly, giving you less control over your living situation. If interest rates rise, this additional cost can be passed onto the renter – making it harder again to save for a deposit to buy.
- Unreliable Landlords: Unfortunately, some bad landlords may delay repairs or fail to resolve maintenance issues promptly and satisfactorily, leaving you stuck with broken appliances or uncomfortable living conditions until the situation is resolved. You have far less control over your own situation.
- Pet Restrictions: Although not a tough as in years gone by, finding a pet-friendly rental can still be difficult, as many landlords have restrictions against animals due to worries about damage to the property.
- No Personal touch: Unlike homeowners, renters are often restricted from redecorating or making lasting changes to their space. This means if you opt to rent, you need to ensure you’re happy with the look and feel of the property before agreeing to move in.
Financial Considerations
The financial commitment of buying a home extends beyond the mortgage deposit. You’ll also need to budget for solicitors’ fees, stamp duty and ongoing repairs.
While a mortgage can often be more affordable than rent in the long term, saving for a deposit can be a major hurdle, especially if you’re paying high rents in the meantime.
For first-time buyers, government schemes can help but planning ahead is essential.
Which Option is Right for You?
Choosing between renting and buying depends on your financial situation, lifestyle and long-term goals. If you value stability and want to invest in property for the long term, buying may be your best bet, but it comes with its own set of challenges, especially around affordability.
On the other hand, renting offers flexibility and fewer immediate financial burdens, meaning you won’t have to sell the property if you’re moving location or a relationship breaks down.
If you are in a position to buy, home-ownership can be one of life’s most rewarding adventures. To make sure you’re fully in the know and on the best deal, why not speak to a mortgage advisor to help you get started?
Speaking to an expert
At Your Mortgage People, we go beyond other so-called “experts” in the mortgage industry by providing unparalleled help, guidance and support throughout the journey – often finding solutions where others simply can’t.
Although all our advisors are CeMAP qualified, we don’t like unnecessary jargon – so our teams speak in plain English and take care to appreciate the uniqueness and demands of every enquiry we receive.
If you’re choosing the best way forward for you, we’re here to help.
Call us now on 01489 346624 or fill out a contact form to get started.
(1) https://ifs.org.uk/books/barriers-homeownership-young-adults
